Projects / Programmes
The reinsurance model for unemployment in the EU: Model simulations of maintaining the number of employees
| Code |
Science |
Field |
Subfield |
| 5.02.02 |
Social sciences |
Economics |
Business sciences |
| Code |
Science |
Field |
| S180 |
Social sciences |
Economics, econometrics, economic theory, economic systems, economic policy |
| Code |
Science |
Field |
| 5.02 |
Social Sciences |
Economics and Business |
recession, unemployment, insurance, reinsurance, European Union, model simulation, automatic stabilizer, employment
Researchers (1)
| no. |
Code |
Name and surname |
Research area |
Role |
Period |
No. of publicationsNo. of publications |
| 1. |
36490 |
PhD Aleš Trunk |
Economics |
Head |
2019 - 2022 |
148 |
Organisations (1)
Abstract
In particular during the period of recession, the EU needs mechanisms that act as automatic stabilizers. Given the many EU-wide agreements and contracts that emphasize solidarity and social and economic cohesion, the reinsurance system for the event of unemployment in the EU (RSUEU) would be a good solution both for reducing asymmetric financial and economic shocks, as well as for economic integration between members. Since 2008, there has been an increase of disparity in the level of unemployment among EU countries and age groups. Boeri and Jimeno (2016) argue that the reason for these differences is related to the labour market institutions, especially considering the interaction of the latter with the scale and nature of the shocks in the context of major recession and the Eurozone debt crisis. They argue that without common institutions, the EU cannot be a federation of countries, such as, for example, USA.
In the EU, it would be wise to introduce a reinsurance system for the event of unemployment. RSUEU – as support of state insurance for the event of unemployment – would cover expenditure related to increased unemployment, and on the other hand, the states budgets would retain more money to stabilize the states economies in the recession. Authors (Buti et al. 2002; Dullien 2012; Epaulard 2014; European Commission 2014) found that the reinsurance system for the event of unemployment directly affects the level of consumption, as it increases the income of the unemployed, and also alleviates the fall in production in the crisis. Institutional reforms are necessary in the euro area, as the monetary union is reducing the scope of macroeconomic stabilization policies at the national level. EU members did not use fiscal policies to ease the recession, and the reinsurance system for the event of unemployment, acting as an automatic stabilizer, would accomplish just that. We believe that the recession reinforces the need for an automatic stabilizer.
The purpose of the study is to examine the possibilities of setting up the RSUEU and to design and test the RSUEU model. We will perform the model simulation using different parameters. The study aims to examine whether the reinsurance system for the event of unemployment would contribute to the stability and efficiency of EU members, and hence the entire EU, and what role it would have as an automatic stabilizer and in maintaining the number of employed population.
The basis of the model derives from the doctoral dissertation of the candidate, within which it was found (Trunk, 2018):
-heterogeneity of countries in the EU (various dynamics of economic growth and unemployment) enables the establishment of the RSUEU. The different characteristics of countries are important for the functioning of the RSUEU, which is based on heterogeneity. We analysed receipts and expenditures of the EU 20 (2003-2013) and identified the countries in which balanced insurance for the event of unemployment was set,
-the RSUEU would contribute to a better protection of income with a direct impact on the income of the unemployed and would at the same time function as an automatic stabilizer of the economy,
-in the USA, the reinsurance system for the event of unemployment affects the development of risky industries, since such a system provides a certain degree of certainty. Workers are therefore easier compelled to opt for high-paying jobs and a high risk of unemployment, and in parallel, the system enables businesses to create high-quality jobs with high wages and a higher risk of unemployment.
By model simulation and by evaluating the operation of the model with which we will simulate RSUEU performance, we will achieve the purpose of the research. We will upgrade the existing RSUEU model (Trunk, 2018), where the essential changes will be: (i) a longer study period; (ii) a larger number of countries involved in RSUEU; and (iii) examining an additional aspect – the impact of RSUEU on maintaining the n
Significance for science
The main original contribution to science in studying the unemployment reinsurance system is the development of a model to simulate the functioning of the unemployment reinsurance system at EU level in the period 2003-2018. The study will be comprehensive: on the basis of literature studies, an analysis of a functioning reinsurance system in the USA and analyzes of existing unemployment insurance in the EU, we will design a model of the reinsurance system for unemployment in the EU. The study will cover the unemployment rate, the number of recipients of compensation, the expenditure of paid unemployment benefits and the mass of wages and simulate the difference between the collected contributions of unemployment insurance and paid benefits. From this, it will be evident in which countries the unemployment insurance is appropriately set, what is the balance between collected contributions of unemployment insurance and paid benefits in the EU in individual years and what is the cumulative difference in the period under consideration. The importance of the theme of reinsurance in the case of unemployment in the EU is also visible, as the European Commission has previously published project calls for joint unemployment insurance in the EU (European Commission 2018).
On the basis of the analysis of unemployment insurance systems, we will determine the level of triggers in the original way, which determines when and to what extent the state would be entitled to cash from the reinsurance system in the case of unemployment. By simulating the model, we will determine whether the PSBEU would contribute to: (i) improving the accessibility and financing of unemployment reinsurance in the EU (safeguarding the income of the unemployed); (ii) to maintain the level of consumption of the unemployed, which would also contribute to reducing the inflation and production gap; (iii) maintaining the number of employees.
Significance for the country
The main original contribution to science in studying the unemployment reinsurance system is the development of a model to simulate the functioning of the unemployment reinsurance system at EU level in the period 2003-2018. The study will be comprehensive: on the basis of literature studies, an analysis of a functioning reinsurance system in the USA and analyzes of existing unemployment insurance in the EU, we will design a model of the reinsurance system for unemployment in the EU. The study will cover the unemployment rate, the number of recipients of compensation, the expenditure of paid unemployment benefits and the mass of wages and simulate the difference between the collected contributions of unemployment insurance and paid benefits. From this, it will be evident in which countries the unemployment insurance is appropriately set, what is the balance between collected contributions of unemployment insurance and paid benefits in the EU in individual years and what is the cumulative difference in the period under consideration. The importance of the theme of reinsurance in the case of unemployment in the EU is also visible, as the European Commission has previously published project calls for joint unemployment insurance in the EU (European Commission 2018).
On the basis of the analysis of unemployment insurance systems, we will determine the level of triggers in the original way, which determines when and to what extent the state would be entitled to cash from the reinsurance system in the case of unemployment. By simulating the model, we will determine whether the PSBEU would contribute to: (i) improving the accessibility and financing of unemployment reinsurance in the EU (safeguarding the income of the unemployed); (ii) to maintain the level of consumption of the unemployed, which would also contribute to reducing the inflation and production gap; (iii) maintaining the number of employees.
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