Unemployment insurance and cultural transmission: Theory and application to European unemployment

This paper emphasizes the two-way causality between the provision of unemployment insurance and the cultural transmission of civicness. The returns to being uncivic are increasing in the generosity of unemployment insurance; but this generosity is decreasing in the number of uncivic individuals. In this context, I determine the evolution of preferences across generations and show that cultural heterogeneity is sustained over the long-run. The dynamics of cultural transmission can generate a long lag between the introduction of unemployment insurance and an increase in people's willingness to live off government-provided benefits. Hence, it offers an explanation to the 'European unemployment puzzle' due to the coexistence of generous unemployment insurance and low unemployment in the 1950s and 1960s.