The Value of Unemployment Insurance

Development, Labor and Public Policy/Public Economics joint seminar

Johannes Spinnewijn (London School of Economics)

May 3, 2018, 11:00–12:30


Room MF 323

Development, Labor and Public Policy Seminar


While a large literature has analysed labour supply responses to social insurance program, the corresponding insurance value of these programs is not well known. The challenge has been to assess the insurance value of mandated programs when no choice is allowed for. This paper analyses the value of unemployment insurance exploiting rich administrative data in Sweden on income, wealth, unemployment, and choices to buy supplemental UI coverage. We exploit this unique opportunity to revisit a consumption-based implementation, linking the value of insurance to the drop in consumption when unemployed, and compare this to a Revealed Preference approach based on UI choices. We also propose a novel implementation using state-dependent marginal propensities to consume. Both methods provide estimates for the value of insurance that are substantially higher than the consumption-based implementation. The paper is joint with Camille Landais (LSE).