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This paper examines how wealth accumulation and risk sharing affect the evolution of inequality over time. We first assume risk sharing away and examine how inequality evolves over time when agents accumulate an asset. If asset accumulation is unbounded and the asset yields a positive return, inequality converges to single value over time. If the asset yields a zero or negative return (e.g., grain storage), there is no persistent inequality but inequality is nevertheless correlated over time. If wealth yields a positive return but is in finite supply (e.g., land), persistent inequality arises if one agent is more thrifty than the other. Multiple equilibria may obtain. Societies might prevent polarization by closing down markets in such assets. We then introduce risk sharing. With perfect risk sharing, welfare inequality is constant across time. For continued participation to mutual insurance to be voluntary, asset inequality must remain 'close' to welfare inequality. With imperfect commitment, the end result is a hybrid situation half-way between the risk sharing model and the pure accumulation model. If risk aversion is high for poor agents but low for rich ones, patronage arises whereby the rich on average take away from the poor.

Die Transformation hierarchischer betrieblicher Steuerung in relationalen Vertrags- und Tauschbeziehungen hat in vielen europäischen Ländern zu einer Zunahme abhängiger Selbständigkeit geführt. Aufgrund des Graubereichs zwischen selbständiger und unselbständiger Beschäftigung stellen abhängig Selbständige eine Herausforderung für die traditionellen Handlungs- und Organisationslogiken der Verbände der Arbeitsbeziehungen dar. Der Aufsatz nimmt die Organisationsfähigkeit und -probleme der Gewerkschaften und Wirtschaftsverbände in den Blick, exemplifiziert diese anhand einer qualitativen Untersuchung der österreichischen Privatversicherungswirtschaft und kommt zu dem Schluss, dass die Konflikte zwischen Arbeit und Kapital längst nicht mehr ausschließlich zwischen Gewerkschaften und Arbeitgeberverbänden verlaufen, sondern zunehmend verbandsintern ausgetragen werden. Dies führt entweder zu einer Zunahme an Interessensdivergenzen, die unter Umständen mit Abspaltung und Partikularismus einzelner Gruppen beantwortet werden, oder - wie in dem untersuchten Fall durch die Gewerkschaften - zur Ignoranz des Problems. In beiden Fällen wird das Problem der Interessensaggregation kurzfristig gelöst; Solidarität und vor allem verhandlungsschwächere Gruppen dürften dabei aber langfristig auf der Strecke bleiben. The shift towards hierarchical governance structures of outsourcing relationships has led to an increase in dependent forms of self-employment. These forms of work which are a grey area between dependent employment and self-employment pose a new challenge to the traditional organisational logic of capital and labour. On the basis of an in-depth case study in the Austrian insurance industry, this paper analyses the new challenges to trade unions and business associations. We conclude that the traditional conflict lines between labour and capital become fuzzy as they are increasingly prevalent within the interest organisations rather than between them, resulting in a divergence of interests within the organisations. We show that this development leads to a sectionalism of specific groups and - as we observe in the case of trade unions - to an ignorance of the problem. In both cases, the problem of interest aggregation is solved in the short-term, but solidarity and especially groups with lower levels of bargaining power are predicted to lose out.

This paper examines whether myopia (misperception of the long-term care (LTC) risk) and private insurance market loading costs can justify social LTC insurance and/or the subsidization of private insurance. We use a two-period model wherein individuals differ in three unobservable characteristics: level of productivity, survival probability and degree of ignorance concerning the risk of LTC (the former two being perfectly positively correlated). The decentralization of a first-best allocation requires that LTC insurance premiums of the myopic agents are subsidized (at a Pigouvian rate) and/or that there is public provision of the appropriate level of LTC. The support for the considered LTC policy instruments is less strong in a second-best setting. When social LTC provision is restricted to zero, a myopic agent's tax on private LTC insurance premiums involves a tradeoff between paternalistic and redistributive (incentive) considerations and we may have a tax as well as a subsidy on private LTC insurance. Interestingly, savings (which goes untaxed in the first-best but plays the role of self-insurance in the second-best) is also subject to (positive or negative) taxation. Social LTC provision is never second-best optimal when private insurance markets are fair (irrespective of the degree of the proportion of myopic individuals and their degree of misperception). At the other extreme, when the loading factor in the private sector is sufficiently high, private coverage is completely crowded out by public provision. For intermediate levels of the loading factors, the solution relies on both types of insurance.

The unemployment protection systems that exist in most Latin American economies are generally considered inadequate in terms of providing insurance to workers. They may also encourage stratified labor markets and impose barriers to the employee's mobility and the firm's adjustment to changing labor market conditions. In addition, some of these systems involve high administrative and monitoring costs and may create additional adverse effects that induce higher unemployment rates and longer duration of unemployment and promote informal labor markets. Recently, research effort and policy interest has turned to Unemployment Insurance Savings Accounts (UISAs) as an alternative to traditional systems of unemployment insurance. UISAs are schemes of individual mandatory savings. Therefore, they smooth income over an individual's life cycle rather than pooling unemployment risk over the total working population at a point in time. This form of unemployment insurance diminishes the moral hazard problems associated with traditional insurance methods. However, it presents problems of its own. First, it is questionable that these systems provide adequate protection against unemployment risk. Additionally, their effects on the promotion of informal labor markets and their administrative costs are yet to be determined. Finally, the effectiveness as a form of unemployment insurance depends critically upon the performance and credibility of the financial institutions managing the funds. This paper examines the experience of Latin American countries that use UISAs, with the hope of highlighting the problems of the system and identifying areas for future theoretical and empirical work. The overall effect of UISAs depends on a vast array of specific country characteristics and program parameters. The way the system is implemented, existing labor regulation, the extent of the informal economy and the scope for collusive behavior greatly influence the success of these programs. This calls for a more extensive research effort in the area.

We characterize how public insurance schemes are constrained by hidden financial transactions. When non-exclusive private insurance entails increasing unit transaction costs, public transfers are only partly offset by hidden private transactions, and can influence consumption allocation. We show that efficient transfer schemes should take into account the impact of insurance on unobservable effort and saving choices as well as the relative cost of public and private insurance technologies. We provide suggestive evidence for the empirical relevance of these results by inspecting the cross-country relationship between available indicators of insurance transaction costs and variation in public and private insurance.

By simulating the working of the unemployment insurance savings accounts (UISAs) in Slovenia using a methodology similar to Feldstein and Altman (1998), the paper examines two questions: how viable is this system as an alternative to traditional unemployment insurance (UI) system, and how the redistribution of income changes if the UI system is replaced by UISAs. The simulations are performed on a representative sample of labor force participants, for which lifetime labor market histories are generated from administrative panel data. Simulations show that the UISA system is a viable alternative to a modest UI system, but that its viability is jeopardized under generous benefits. Under the modest regime (here identified with a post-1998 period, the period after the UI reform which strongly reduced the maximum potential duration of benefit, for most workers even by half) our calculations show that only one quarter of workers end their working life with negative cumulative balance and 43 percent ever experience a negative UISA balance; in contrast, under the generous regime (here identified with the pre-1998-reform period), 49 percent of workers end their working life with negative cumulative balance and 66 percent ever experience a negative balance. Moreover, under the modest benefit regime workers are better able to recover positive UISA balance. The simulations also show that the level of redistribution under the UISAs lags substantially behind the UI system, even though the version of the UISAs studied permits borrowing and hence allows for redistribution.

Unemployment Insurance Savings Accounts (UISAs) entitle workers to unemployment benefits at the expense of future pension payments. Therefore, such accounts make unemployment less attractive, intensify job search, and raise employment. In the present paper the wage and employment consequences of UISAs are investigated in a model of collective wage determination. In the basic set-up, UISAs induce a trade union to lower wages. This effect can also arise if (1) balanced-budget repercussions are taken into account, (2) individual job search is incorporated, and (3) wage-dependent pensions are allowed for. However, the requirements for negative wage effects to arise become stricter than in the base model. Thus, collective bargaining creates additional impediments for the positive employment consequences of UISAs.

Mutual insurance companies and stock insurance companies are different forms of organized risk sharing: policyholders and owners are two distinct groups in a stock insurer, while they are one and the same in a mutual. This distinction is relevant to raising capital, selling policies, and sharing risk in the presence of financial distress. Up-front capital is necessary for a stock insurer to offer insurance at a fair premium, but not for a mutual. In the presence of an ownermanager conflict, holding capital is costly. Free-rider and commitment problems limit the degree of capitalization that a stock insurer can obtain. The mutual form, by tying sales of policies to the provision of capital, can overcome these problems at the potential cost of less diversified owners. JEL Classification: G22, G32

Wir präsentieren einen Vorschlag für die Neuausrichtung der Arbeitslosenunterstützung in Deutschland: die Einführung von Beschäftigungskonten. Anstatt Steuern/Beiträge zu zahlen, die die Arbeitslosenunterstützung finanzieren, zahlen Beschäftigte laufend auf Ihre Beschäftigungskonten ein, von denen sie während der Arbeitslosigkeit Beträge abheben können. Werden Beschäftigungskonten eingeführt, so werden die Beschäftigungsanreize gestärkt, ohne die existierende Umverteilung signifikant zu verändern. Wir stellen detailliert dar, wie ein solches System von Beschäftigungskonten in Deutschland ausgestaltet und implementiert werden kann. Um die Einführung von Beschäftigungskonten so transparent wie möglich zu machen, wird das neue System als ein Teil des bisherigen Systems aufgefasst und alle weiteren institutionellen Regelungen werden beibehalten. We present a proposal for reforming unemployment assistance in Germany through the introduction of unemployment accounts (UAs). Instead of paying taxes that finance the unemployment assistance, employed people make ongoing contributions to their UAs and can make withdrawals from these accounts during periods of unemployment. The aim of this policy proposal is to improve employment incentives without significant changes in the current redistribution scheme. We provide a detailed account of how such a system of UAs can be designed and implemented in Germany. To make the influence of UAs as transparent as possible and to avoid introducing other reforms that may make significant bodies of people worse off, we assume that UAs are integrated within the existing unemployment support system, keeping all institutional rules regarding conditions, duration and size of entitlements as well as interpersonal redistribution unchanged.

Free and competitive insurance markets are not able to provide a system which can be considered economically efficient to deal with the material risks of unemployment. Nor are individual unemployment insurance savings accounts – even when regulated by the state – a superior alternative. If the economic feasibility of an unemployment insurance system is not in itself to be put at risk, coverage must in general be the responsibility of the state. However, the present design of state unemployment insurance can only be regarded as very inefficient and requiring urgent comprehensive reform. An increase in individual freedom and responsibility, as well as more competition are at the heart of a promising modern reform concept which takes into account the specific nature of the risk inherent in unemployment.

The authors calculate the statistic fundamentals of a dual system of private unemployment insurance, using data of the year 2000. It is shown how much the individual employee would have to invest for a variety of unemployment payments and for a variety of individual “real” risks. In addition, it is demonstrated that each individual can reduce his/her insurance premium by simply declaring a higher degree of regional, professional, or income-related mobility. On the employers’ side it is elaborated that, via autoregressive processes, employment increases, and that at the same time each employer reduces the rate of his firm’s unemployment tax. Es wird gezeigt, dass die heute bestehende statistische Basis ausreicht, den Übergang von einem kollektivistischen System der Absicherung von Arbeitslosigkeit zu einem individualistischen Trennsystem zu bewältigen. Zunächst wird die Methodik zur Bestimmung des individuellen ?realen" Arbeitslosigkeitsrisikos dargestellt und dann anhand von empiriegestützten Beispielen das Spektrum dieser Risiken für das Jahr 2000 sowie die dazugehörige Prämienstruktur ermittelt. Auf dieser Grundlage wird beschrieben, wie ein Arbeitnehmer mit einem schlechten realen Risiko auf einfachem Wege, nämlich durch bloße Erklärung gegenüber der Versicherung, seine individuelle Risikoeinstufung merklich verbessern und seine Prämienleistung senken kann. Für die Arbeitgeberseite wird gezeigt, wie die bisher geleisteten Abgaben dem Entlassungsverhalten eines Unternehmens entsprechend individuell gesenkt werden können.

Denmark has drawn much attention for its active labor market policies, but is almost unique in offering a voluntary public unemployment insurance program requiring a significant premium payment. A safety net program – a less generous, means-tested social assistance plan – completes the system. The voluntary system emerged as one of many European "Ghent systems," essentially government subsidized trade union plans, but has since lost many key features of such plans. We assess system performance using a 10% sample of the Danish population drawn from administrative data. Coverage rates for the voluntary programs are surprisingly high, approximately 80 percent of the workforce, but the program has predictable selection effects, including adverse selection across risk classes and a substantial charity hazard (low coverage among those with generous treatment under the safety net program). The latter appears to explain the difficulty of shifting to a compulsory system; redistribution effects would be concentrated among the previously uninsured in the lowest decile of the income distribution, a problem in the Danish welfare state.

Mutual insurance has been shown, theoretically and empirically, to be incomplete and limited by asymmetric information and lack of enforcement mechanisms. While some research has shown that networks based on kinship, neighbourhood and ethnicity may provide a locus of insurance and thus a way of overcoming these problems, these studies are not fine enough to predict the inclusion and exclusion of individuals. Using data from rural Ghana, we examine the role of social relations in obtaining assistance in the face of shocks. We examine this at both intra-household and community levels. At the household level, asking for and receiving assistance from the spouse is related to gender, the quality of the marital relationship, and the wealth of household members. At the community level, asking for and receiving help are correlated with membership in a major lineage, participation in secular organizations, the individual’s fostering history, and anticipated land inheritance. We also show that these factors differ depending on whether the shortfall was for a household or personal item (as perceived by the respondent). This work helps us to identify individuals who are more likely to fall outside of mutual insurance networks and require interventions to help them cope with risk. – risk ; social networks ; mutual insurance ; intrahousehold allocation