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Do Benefit Hikes Damage Job Finding? Evidence from Swedish Unemployment Insurance Reforms

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  • Helge Bennmarker
  • Kenneth Carling
  • Bertil Holmlund

Abstract

In 2001 and 2002, Sweden introduced several unemployment insurance reforms. A major innovation in the first reform was the introduction of a two-tiered benefit structure for some unemployed individuals. This system involved supplementary compensation during the first 20 weeks of unemployment. The 2002 reform retained the two-tiered benefit structure but involved also substantial benefit hikes for spells exceeding 20 weeks. This paper examines how these reforms affected transitions from unemployment to employment. We take advantage of the fact that the reforms had quasi-experimental features where the “treatments” differed considerably among unemployed individuals. We find that the reforms had strikingly different effects on job finding among men and women. The two reforms in conjunction are estimated to have increased the expected duration of unemployment among men but to have decreased the duration of unemployment among women. The overall effect on the duration of unemployment is not statistically different from zero. However, the reforms reduced job finding among males who remained unemployed for more than 20 weeks.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1460.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1460

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Keywords: unemployment duration; unemployment benefits;

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  1. Carling, Kenneth & Edin, Per-Anders & Harkman, Anders & Holmlund, Bertil, 1996. "Unemployment duration, unemployment benefits, and labor market programs in Sweden," Journal of Public Economics, Elsevier, Elsevier, vol. 59(3), pages 313-334, March.
  2. Røed, Knut & Jensen, Peter & Thoursie, Anna, 2003. "Unemployment Duration, Incentives and Institutions - A Micro-Econometric Analysis Based on Scandinavian Data," Memorandum, Oslo University, Department of Economics 09/2002, Oslo University, Department of Economics.
  3. Lawrence F. Katz & Bruce D. Meyer, 1988. "The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment," NBER Working Papers 2741, National Bureau of Economic Research, Inc.
  4. Carling, Kenneth & Holmlund, Bertil & Vejsiu, Altin, 1999. "Do Benefit Cuts Boost Job Findings? Swedish Evidence from the 1990s," Working Paper Series, Uppsala University, Department of Economics 1999:20, Uppsala University, Department of Economics.
  5. Lalive, Rafael & Zweimüller, Josef, 2002. "Benefit Entitlement and Unemployment Duration: The Role of Policy Endogeneity," IZA Discussion Papers 492, Institute for the Study of Labor (IZA).
  6. Fredriksson, Peter & Holmlund, Bertil, 1998. "Optimal Unemployment Insurance in Search Equilibrium," Working Paper Series, Uppsala University, Department of Economics 1998:2, Uppsala University, Department of Economics.
  7. Knut Roed & Tao Zhang, 2003. "Does Unemployment Compensation Affect Unemployment Duration?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 113(484), pages 190-206, January.
  8. Hamermesh, Daniel S, 1980. "Unemployment Insurance and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(3), pages 517-27, October.
  9. Hamermesh, Daniel S, 1979. "Entitlement Effects, Unemployment Insurance and Employment Decisions," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 17(3), pages 317-32, July.
  10. David Card & Phillip B. Levine, 1998. "Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program," NBER Working Papers 6714, National Bureau of Economic Research, Inc.
  11. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, Elsevier, vol. 28(1), pages 85-101, April.
  12. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
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Cited by:
  1. James Costain & Michael Reiter, 2005. "Business Cycles, Unemployment Insurance and the Calibration of Matching Models," Working Papers 215, Barcelona Graduate School of Economics.
  2. Per Engström & Bertil Holmlund, 2006. "Tax Evasion and Self-Employment in a High-Tax Country: Evidence from Sweden," CESifo Working Paper Series 1736, CESifo Group Munich.
  3. Gonzales-Eiras, Martín & Niepelt, Dirk, 2004. "Sustaining Social Security," Seminar Papers, Stockholm University, Institute for International Economic Studies 731, Stockholm University, Institute for International Economic Studies.
  4. Uusitalo, Roope & Verho, Jouko, 2010. "The effect of unemployment benefits on re-employment rates: Evidence from the Finnish unemployment insurance reform," Labour Economics, Elsevier, Elsevier, vol. 17(4), pages 643-654, August.
  5. Berg, Lennart & Berger, Tommy, 2005. "The Q theory and the Swedish housing market –an empirical test," Working Paper Series, Uppsala University, Department of Economics 2005:19, Uppsala University, Department of Economics.
  6. Bergemann, Annette & van den Berg, Gerard J., 2014. "From giving birth to paid labor: the effects of adult education for prime-aged mothers," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2014:5, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  7. Rosholm, Michael & Vejlin, Rune, 2010. "Reducing income transfers to refugee immigrants: Does start-help help you start?," Labour Economics, Elsevier, Elsevier, vol. 17(1), pages 258-275, January.
  8. Johansson, Fredrik & Klevmarken, Anders, 2006. "Explaining the size and nature of response in a survey on health status and economic standard," Working Paper Series, Uppsala University, Department of Economics 2006:2, Uppsala University, Department of Economics.
  9. Hallberg, Daniel, 2006. "Cross-national differences in income poverty among Europe´s 50+," Working Paper Series, Uppsala University, Department of Economics 2006:14, Uppsala University, Department of Economics.
  10. Erixon, Lennart, 2011. "Under the influence of traumatic events, new ideas, economic experts and the ICT revolution - the economic policy and macroeconomic performance of Sweden in the 1990s and 2000s," Research Papers in Economics, Stockholm University, Department of Economics 2011:25, Stockholm University, Department of Economics.

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