Due to the absence of unemployment insurance (UI) choices, the traditional approach to estimating the value of UI is to infer it from the observed consumption response to job loss under some assumption on risk preferences. Exploiting the rich data and unique policy context in Sweden, we propose two alternative approaches that relax this assumption and we implement all three methods on the same sample of workers. The first approach considers the difference in marginal propensity to consume (MPC) when unemployed versus employed, which allows to identify the difference in prices to smooth consumption in the respective states. The second approach exploits UI choices embedded in the Swedish UI system in a Revealed Preference approach. While the drop in consumption expenditures is relatively small (∼13%), we find that the MPC is around 25% higher when unemployed than employed, translating into a marginal value of transfers that is at least 60% higher when unemployed than employed. This high value of UI is confirmed by our RP estimates and indicates substantial risk aversion given the relatively small drop in consumption expenditures.

This paper studies the predictability of long-term unemployment (LTU) using rich administrative data from Sweden. We establish substantial heterogeneity in LTU risk across individuals, accounting for both observed and unobserved heterogeneity using a wide range of observable predictors and multiple-spell outcomes, respectively. We apply our prediction algorithm to study the dynamics of job finding over the unemployment spell and the business cycle. Selection effects can explain most of the decline in average job finding over the unemployment spell but little of its cyclicality. We also find sizable heterogeneity in the profiles of job finding over the unemployment spell but not over the business cycle.

Despite evidence that many consumers in health insurance markets are subject to information frictions, approaches used to evaluate these markets typically assume informed, active consumers. We develop a general framework to study insurance market equilibrium in the presence of choice frictions and evaluate key policy interventions. We identify sufficient relationships between the underlying distributions of consumer costs, surplus from risk protection, and choice frictions that determine the welfare impact of friction-reducing policies. We implement our approach empirically, showing how these key sufficient objects can be measured and the link between these objects and policy outcomes.

We study the impact of simplification, deterrence, and tax morale on tax compliance. We ran four natural field experiments varying the communication of the tax administration with the universe of income taxpayers in Belgium throughout the tax process. A consistent picture emerges across experiments: (i) simplifying communication substantially increases compliance, (ii) deterrence messages have an additional positive effect, (iii) invoking tax morale is not effective and often backfires. A discontinuity in enforcement intensity, combined with the experimental variation, allows us to compare simplification with standard enforcement measures. We find that simplification is far more cost-effective, allowing for substantial savings on enforcement costs.

This paper uses job seekers’ elicited beliefs about job finding to disentangle the sources of the decline in job-finding rates by duration of unemployment. We document that beliefs have strong predictive power for job finding, but are not revised downward when remaining unemployed and are subject to optimistic bias, especially for the long-term unemployed. Leveraging the predictive power of beliefs, we find substantial heterogeneity in job finding with the resulting dynamic selection explaining most of the observed negative duration dependence in job finding. Moreover, job seekers’ beliefs underreact to heterogeneity in job finding, distorting search behavior and increasing long-term unemployment.

This paper studies whether adverse selection can rationalize a universal mandate for unemployment insurance (UI). Building on a unique feature of the unemployment policy in Sweden, where workers can opt for supplemental UI coverage above a minimum mandate, we provide the first direct evidence for adverse selection in UI and derive its implications for UI design. We find that the unemployment risk is more than twice as high for workers who buy supplemental coverage. Exploiting variation in risk and prices, we show how 25–30 percent of this correlation is driven by risk-based selection, with the remainder driven by moral hazard. Due to the moral hazard and despite the adverse selection we find that mandating the supplemental coverage to individuals with low willingness-to-pay would be suboptimal. We show under which conditions a design leaving choice to workers would dominate a UI system with a single mandate. In this design, using a subsidy for supplemental coverage is optimal and complementary to the use of a minimum mandate.

This paper analyzes consumption to evaluate the distributional effects of pension reforms. Using Swedish administrative data, we show that on average, workers who retire earlier consume less while retired and experience larger drops in consumption around retirement. Interpreted via a theoretical model, these findings imply that reforms incentivizing later retirement incur a substantial consumption smoothing cost. Turning to other features of pension policy, we find that reforms that redistribute based on early-career labor supply would have opposite-signed redistributive effects, while differentiating on wealth may help to target pension benefits toward those who are vulnerable to larger drops in consumption around retirement.

This paper provides a simple, yet robust framework to evaluate the time profile of benefits paid during an unemployment spell. We derive sufficient-statistics formulae capturing the marginal insurance value and incentive costs of unemployment benefits paid at different times during a spell. Our approach allows us to revisit separate arguments for inclining or declining profiles put forward in the theoretical literature and to identify welfare-improving changes in the benefit profile that account for all relevant arguments jointly. For the empirical implementation, we use administrative data on unemployment, linked to data on consumption, income, and wealth in Sweden. First, we exploit duration-dependent kinks in the replacement rate and find that, if anything, the moral hazard cost of benefits is larger when paid earlier in the spell. Second, we find that the drop in consumption affecting the insurance value of benefits is large from the start of the spell, but further increases throughout the spell. In trading off insurance and incentives, our analysis suggests that the flat benefit profile in Sweden has been too generous overall. However, both from the insurance and the incentives side, we find no evidence to support the introduction of a declining tilt in the profile.

To fight evasion, many developing countries use production-inefficient tax policies. This includes minimum tax schemes whereby firms are taxed on either profits or turnover, depending on which tax liability is larger. Such schemes create nonstandard kink points, which allow for eliciting evasion responses to switches between profit and turnover taxes using a bunching approach. Using administrative data on corporations in Pakistan, we estimate that turnover taxes reduce evasion by up to 60–70 percent of corporate income. Incorporating this in a calibrated optimal tax model, we find that switching from profit to turnover taxation increases revenue by 74 percent without reducing aggregate profits.