“Unemployment insurance involves moral hazard” | EUROtoday

Winner of the Best Young Economist Prize 2024, Alexandra Roulet appears to be like again on her work in addition to her expertise as an financial advisor on the Elysée and Matignon.

How did you come to financial analysis and to specialize within the query of labor?

I hesitated between an educational or administrative profession. It was the assembly with my academics, Daniel Cohen on the Ecole Normale, then Philippe Aghion at Harvard, which was decisive due to their infectious enthusiasm. As for the query of labor, I mentioned it with Lawrence F. Katz, a professor at Harvard. It is true that many French persons are drawn to this theme, maybe pushed by the significance of the unemployment subject in our nation.

You labored on unemployment insurance coverage, a present subject. What has your analysis yielded?

Unemployment insurance coverage is meant to mitigate a shock, that of lack of revenue. But it should additionally assist with the seek for a brand new job. Like any insurance coverage, it entails an ethical hazard, if it doesn’t encourage individuals to search out work shortly sufficient.

With Thomas Le Barbanchon and Roland Rathelot, we checked out whether or not being entitled to an extended length of compensation additionally induced an extended length of job search. We discovered that, if we improve the length of compensation by 10%, the length of unemployment will increase by 3%. This determine is in keeping with research which have been carried out overseas on the identical topic. We would absolutely be round 2% if we had been in a position to take a look at the length of non-employment, some exits from unemployment are usually not essentially in the direction of employment. But, above all, we questioned concerning the interpretation of this statement: do individuals keep unemployed longer as a result of they’ve time or as a result of they’re on the lookout for a greater job?

Our work, which lined the interval 2006-2012, exhibits {that a} longer length of compensation doesn’t modify the job search standards (reservation wage, kind of contract, and so on.) and, due to this fact, in all probability doesn't result in discovering a greater job.

Opponents of the unemployment insurance coverage reform and that of 2023, which relies on any such research, can emphasize that this order of magnitude of three% is minimal in view of the unfavorable social results that this induces…

That's the entire query. Are the positive aspects adequate with regard to different standards, akin to the chance of inducing for some a shift in social minimums? This is the place economists diverge and politicians arbitrate. Our paper itself was not public coverage recommendation.

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