Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/233102
Authors: 
Fenge, Robert
Friese, Max
Year of Publication: 
2021
Series/Report no.: 
Thünen-Series of Applied Economic Theory - Working Paper No. 162
Abstract: 
Our study compares the efficiency of unemployment insurance programs in a state union. A centralized insurance pools the cost of unemployment which implies a collective bargaining in the countries that leads to excessively high wages and inefficient insurance. Those high wages attract workers who reduce the outsourced economic cost of unemployment. Only with perfect mobility, this opposing migration effect completely outweighs the pooling effect, and the insurance is no longer inefficient when centralized. Furthermore, we conclude that a principle of efficient federal systems might be that fiscally linked economic policies and institutions should be governed on the same federative level.
Subjects: 
unemployment insurance
imperfect labor markets
federal state union
centralization
migration
vertical fiscal externality
JEL: 
F22
F66
H77
J65
Document Type: 
Working Paper

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