Introducing unemployment insurance to developing countries

Milan Vodopivec

doi:10.1186/2193-9004-2-1

Abstract

Abstract The paper analyzes key labor market and institutional features of developing countries that affect functioning of unemployment insurance: a large informal sector, weak administrative capacity, and large political risk. It argues that these countries should tailor an OECD-style unemployment insurance program to their circumstances, among others by relying on self-insurance (via unemployment insurance savings accounts), complemented by solidarity funding, as a key source of financing; by simplifying monitoring of job-search behavior and labor market status; and by piggybacking on existing networks to administer benefits. The paper also addresses the question whether developing countries should introduce unemployment insurance. JEL codes J65, J68

Highlights

Unemployment insurance (UI) is the most common public income support program for the unemployed in developed countries
Stylized facts about UI: opportunities and limitations posed by UI introduction An OECD-style UI program typically requires that workers and their employers pay earnings-related contributions which, upon separation, entitle workers to unemployment benefits according to predetermined eligibility conditions
The paper argues that the introduction of UI to developing countries provides an opportunity to bolster worker protection as well as, for some countries, to promote productivity

Summary

Introduction

Unemployment insurance (UI) is the most common public income support program for the unemployed in developed countries. 3. Stylized facts about UI: opportunities and limitations posed by UI introduction An OECD-style UI program typically requires that workers and their employers pay earnings-related contributions which, upon separation, entitle workers to unemployment benefits according to predetermined eligibility conditions.

Results

Conclusion