Our paper proposes a formal model of collective choice on the unemployment insurance (UI) that takes into account both the level and the duration of the unemployment benefits. Many theoretical papers have focused on the pure (re)distributive effect of the unemployment insurance (e.g. Rehm[2011]), distinguishing between more or less generous UI systems. We think that this analysis could be usefully deepened to assess for a broader variety of UI designs, in particular to take into account the fact that UI benefits often decrease with time (it is typically the case when unemployment insurance is replaced by a minimal safety net for long-term unemployed). In our framework workers not only differ in wage and in their risk of unemployment but also in their expected duration of unemployment. Benefits are funded through a tax levied on wage of employed workers. Individuals vote on the level of UI benefits for short-term and long-term unemployment. We show that the existence of a large middle wage class of workers facing a relative high risk of unemployment can generate an institutional arrangement, where unemployment benefits are medium in level but generous regarding their duration. Using panel data we show that Germany, a typical Bismarckian country, is characterized by the existence of such a class of workers, currently referred in the literature as workers with specific skills.
