Incentive Effects of Unemployment InsuranceSavings Accounts: Evidence from Chile

This study examines the determinants of job-finding rates of unemployment benefit recipientsunder the Chilean program. This is a unique, innovative program that combines socialinsurance through a solidarity fund (SF) with self-insurance in the form of unemploymentinsurance savings accounts (UISAs) – so as to mitigate the moral hazard problem oftraditional unemployment insurance programs. Our study is the first one to empiricallyinvestigate whether UISAs improve work incentives. We find that for beneficiaries using theSF, the pattern of job finding rates over the duration of unemployment is consistent withmoral hazard effects, while for beneficiaries relying on UISAs, the pattern is free of sucheffects. We also find that for benefit recipient not entitled to use the SF, the amount ofaccumulation on the UISA does not affect the exit rate from unemployment, suggesting thatsuch individuals internalize the costs of unemployment benefits. Our results provide strongsupport to the idea that UISAs can improve work incentives....