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Algann, Y., Cahuc, P. (2009). Civic Virtue and Labor Market Institutions. American Economic Journal: Macroeconomics 1 (1), 111-145.

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

Authors

Algan, Yann

Yann Algan is Professor of Economics at Sciences Po Paris. He is affiliated to CEPR, IZA and CEPREMAP (Co-head Macroeconomic program). Awards and grants European Starting Grant (ERC) 2010-2014 - Project "Trust" Best French Young Economist 2009 Best French economic book and...

Cahuc, Pierre

Pierre Cahuc is Professor of Economics Ecole Polytechnique and Research fellow CREST-INSEE, IZA,CEPR Selected publications Is short-time work a good method to keep unemployment down? with Stéphane Carcillo, forthcoming in the Nordic Economic Policy Review Civil Society and...

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