Introduction and economic efficiency of unemployment insurance in a developing country: applications to Turkey.

Summary The main purpose of unemployment insurance systems is to protect workers against fluctuations in their income due to involuntary unemployment. The first unemployment insurance schemes emerged in various European countries through trade unions. For example, Switzerland was the first country to have a trade union program addressing unemployment insurance in 1789. In 1911, the United Kingdom had the first compulsory system. All major industrialized countries adopted mandatory UI programs in the following decades. These are now an important component of existing social security systems. Although unemployment insurance is present in all developed countries, it is remarkably absent in most developing countries. Nevertheless, since the 1990s, several less developed countries have adopted unemployment insurance schemes. For example, over the past decade, most Central and Eastern European countries have introduced unemployment compensation schemes in response to the deterioration of their labor markets following the profound structural transformation of their economies. There is also a trend toward the adoption of unemployment insurance in Latin American countries to protect workers from the growing risk of unemployment associated with macroeconomic contingencies. Despite this trend, unemployment compensation programs are still lacking in most developing countries.