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Do unemployment benefits promote or hinder job reallocation?

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  • Boeri, Tito
  • Macis, Mario

Abstract

According to recent and largely untested theories, unemployment benefits (UBs) could improve the extent and quality of job reallocation even at the cost of increasing unemployment. In this paper, we use a new set of yearly panel data from a large number of countries to evaluate empirically the relationship between unemployment benefits and job reallocation. Unlike previous work assessing the effects of UBs on labor market stocks, we focus on flows and rely on policy "experiments," notably the introduction from scratch of unemployment benefits in many countries. We exploit the longitudinal nature of our data to lessen the potentially important selection, endogeneity, and omitted variable problems. We find a positive, sizable, and significant effect of the introduction of UBs on job reallocation, arising mainly from the job destruction margin although this effect fades away over time. These findings appear to be robust to changes in the countries in the sample, control variables or estimation methods. We discuss to what extent our results are consistent with equilibrium matching models with or without endogenous sorting of workers into jobs providing entitlement to UBs and stochastic job matching.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 93 (2010)
Issue (Month): 1 (September)
Pages: 109-125

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Handle: RePEc:eee:deveco:v:93:y:2010:i:1:p:109-125

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Unemployment benefits Job reallocation Matching models;

References

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Citations

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Cited by:
  1. Boeri, Tito, 2009. "Setting the Minimum Wage," IZA Discussion Papers 4335, Institute for the Study of Labor (IZA).
  2. Elisa Gamberoni & Erik Von Uexkull & Sebastian Weber, 2010. "The Roles of Openness and Labor Market Institutions for Employment Dynamics during Economic Crises," World Bank Other Operational Studies 10155, The World Bank.
  3. Tat Hui, Weng & Toh, Ruby, 2014. "Growth with equity in Singapore : challenges and prospects," ILO Working Papers 485017, International Labour Organization.
  4. Ariane Tichit Miniscloux & Solenne Tanguy, 2012. "Initial reforms and dynamics of transition," Working Papers halshs-00687532, HAL.
  5. Sophia Lee, 2013. "Examining policy configurations as conditions for long-term unemployment and non-standard employment in OECD countries using fuzzy-set analysis," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(6), pages 3521-3536, October.

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