Employment and Wage Insurance within Firms: Worldwide Evidence

If unemployment insurance is more generous, workers should demand less implicit insurance from their employers: firm- and government-provided insurance should be substitutes. Using a firm-level international panel dataset, we investigate this hypothesis exploiting cross-country and time-series variation in public unemployment insurance as a shifter of workers’ demand for insurance within firms, and family vs. non-family ownership as a shifter of firms’ supply of insurance.

We find that employment stability in family firms is greater, and the wage discount larger, in countries with more generous public unemployment insurance, while no such substitutability is present for non-family firms.