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American Economic Journal: Macroeconomics: Vol. 1 No. 1 (January 2009)

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Civic Virtue and Labor Market Institutions

Article Citation

Algan, Yann, and Pierre Cahuc. 2009. "Civic Virtue and Labor Market Institutions." American Economic Journal: Macroeconomics, 1(1): 111-45.

DOI: 10.1257/mac.1.1.111

Abstract

We argue civic virtue plays a key role in explaining the design of public insurance against unemployment risks by solving moral hazard issues which hinder the efficiency of unemployment insurance. We show, in a simple model, that economies with stronger civic virtues are more prone to provide insurance through unemployment benefits rather than through job protection. We provide cross-country empirical evidence of a strong correlation between civic attitudes and the design of unemployment benefits and employment protection in OECD countries over the period 1980 to 2003. We then use an epidemiological approach to estimate the existence of a potential causal relationship from inherited civic virtue to labor market insurance institutions. (JEL: J41, J65, J68, Z13)

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Authors

Algan, Yann (Paris East U)
Cahuc, Pierre (Ecole Polytechnique, Malakoff)

JEL Classifications

J41: Labor Contracts
J65: Unemployment Insurance; Severance Pay; Plant Closings
J68: Mobility, Unemployment, and Vacancies: Public Policy
Z13: Economic Sociology; Economic Anthropology

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American Economic Journal: Macroeconomics


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