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A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay

A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance... AbstractThis paper considers fiscal policy during the pandemic through the lens of optimal social insurance. We develop a simple framework to analyze how government taxes and transfers could mimic the insurance that people would like to have had against pandemic income losses. Permutations of the framework provide insight into how unemployment insurance should be structured, when and how much hazard pay is called for, and whether fiscal policy should aim just to redistribute income or also to stimulate aggregate demand during a pandemic. When we use the insights from the model to evaluate unemployment insurance measures taken during the pandemic, we find that some, but far from all, of the implications of the social insurance framework were followed. In the case of hazard pay, we find that the proposal for a national program (the never-implemented HEROES Act) was both broader and more generous than a social insurance perspective would call for. We suggest that the social insurance perspective on fiscal policy is likely to become increasingly relevant as pandemics and climate-related natural disasters become more common causes of unemployment and recessions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Perspectives American Economic Association

A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay

A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay

Journal of Economic Perspectives , Volume 36 (2) – May 1, 2022

Abstract

AbstractThis paper considers fiscal policy during the pandemic through the lens of optimal social insurance. We develop a simple framework to analyze how government taxes and transfers could mimic the insurance that people would like to have had against pandemic income losses. Permutations of the framework provide insight into how unemployment insurance should be structured, when and how much hazard pay is called for, and whether fiscal policy should aim just to redistribute income or also to stimulate aggregate demand during a pandemic. When we use the insights from the model to evaluate unemployment insurance measures taken during the pandemic, we find that some, but far from all, of the implications of the social insurance framework were followed. In the case of hazard pay, we find that the proposal for a national program (the never-implemented HEROES Act) was both broader and more generous than a social insurance perspective would call for. We suggest that the social insurance perspective on fiscal policy is likely to become increasingly relevant as pandemics and climate-related natural disasters become more common causes of unemployment and recessions.

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Publisher
American Economic Association
Copyright
Copyright © 2022 © American Economic Association
ISSN
0895-3309
DOI
10.1257/jep.36.2.3
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper considers fiscal policy during the pandemic through the lens of optimal social insurance. We develop a simple framework to analyze how government taxes and transfers could mimic the insurance that people would like to have had against pandemic income losses. Permutations of the framework provide insight into how unemployment insurance should be structured, when and how much hazard pay is called for, and whether fiscal policy should aim just to redistribute income or also to stimulate aggregate demand during a pandemic. When we use the insights from the model to evaluate unemployment insurance measures taken during the pandemic, we find that some, but far from all, of the implications of the social insurance framework were followed. In the case of hazard pay, we find that the proposal for a national program (the never-implemented HEROES Act) was both broader and more generous than a social insurance perspective would call for. We suggest that the social insurance perspective on fiscal policy is likely to become increasingly relevant as pandemics and climate-related natural disasters become more common causes of unemployment and recessions.

Journal

Journal of Economic PerspectivesAmerican Economic Association

Published: May 1, 2022

There are no references for this article.