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Incentive-Compatible Unemployment Reinsurance for the Euro Area / Alexander Karaivanov, Benoit Mojon, Luiz Pereira da Silva, Albert Pierres Tejada, Robert Townsend.
- Format:
- Book
- Author/Creator:
- Karaivanov, Alexander.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w32396.
- NBER working paper series no. w32396
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2024.
- Summary:
- We model a reinsurance mechanism for the national unemployment insurance programs of euro area member states. The risk-sharing scheme we analyze is designed to smooth country-level unemployment risk and expenditures around each country's median level, so that participation and contributions remain incentive-compatible at all times and there are no redistributionary transfers across countries. We show that, relative to the status quo, such scheme would have provided nearly perfect insurance of the euro area member states' unemployment expenditures risk in the aftermath of the 2009 sovereign debt crisis if allowed to borrow up to 2 percent of the euro area GDP. Limiting, or not allowing borrowing by the scheme would have still provided significant smoothing of surpluses and deficits in the national unemployment insurance programs over the period 2000-2019.
- Notes:
- Print version record
- May 2024.
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