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How Changes in Potential Benefit Duration Affect Equilibrium Unemployment

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  • Lalive, R.
  • Ours, J.C. van
  • Zweimüller, J.

    (Tilburg University, Center for Economic Research)

Abstract

This paper uses microdata to evaluate the impact of an increase in maximum bene.t duration on the steady-state unemployment rate.We draw on policy changes in Austria that extended maximum benefit duration from 30 to 52 weeks for individuals above age 50 and from 30 to 39 weeks for individuals between ages 40 and 49.We use these changes to estimate the causal impact of benefit duration on labor market flows and find that (i) the policy changes lead to an increase in the steady-state unemployment rate between 20 % and 50 %; (ii) surprisingly, most of the increase is due to an increase in the inflow into unemployment, whereas the decrease in the outflow from unemployment is modest; (iii) the effects are stronger for women than for men, but are otherwise rather robust across population subgroups.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2006-94.

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Date of creation: 2006
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Handle: RePEc:dgr:kubcen:200694

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Web page: http://center.uvt.nl

Related research

Keywords: maximum benefit duration; unemployment duration; unemployment inflow; equilibrium unemployment;

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References

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  1. Rafael Lalive & Josef Zweimüller, . "Benefit Entitlement and Unemployment Duration - The Role of Policy Endogeneity," IEW - Working Papers 112, Institute for Empirical Research in Economics - University of Zurich.
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  7. Lalive, R. & Ours, J.C. van & Zweimüller, J., 2004. "How Changes in Financial Incentives Affect the Duration of Unemployment," Discussion Paper 2004-86, Tilburg University, Center for Economic Research.
  8. David A. Green & Timothy Sargent, 1998. "Unemployment Insurance and Job Durations: Seasonal and Non-Seasonal Jobs," Canadian Journal of Economics, Canadian Economics Association, vol. 31(2), pages 247-278, May.
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  10. van Ours, Jan C & Vodopivec, Milan, 2006. "Shortening the Potential Duration of Unemployment Benefits Does Not Affect the Quality of Post-Unemployment Jobs: Evidence from a Natural Experiment," CEPR Discussion Papers 5741, C.E.P.R. Discussion Papers.
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  16. Winter-Ebmer, Rudolf, 1998. "Potential Unemployment Benefit Duration and Spell Length: Lessons from a Quasi-Experiment in Austria," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(1), pages 33-45, February.
  17. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
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  20. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
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  22. Patrick A. Puhani, 2000. "Poland on the dole: The effect of reducing the unemployment benefit entitlement period during transition," Journal of Population Economics, Springer, vol. 13(1), pages 35-44.
  23. Berg, G.J. van den, 1987. "Nonstationarity in job search theory," Research Memorandum 242, Tilburg University, Faculty of Economics and Business Administration.
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Cited by:
  1. van Ours, Jan C. & Tuit, Sander, 2010. "How Changes in Unemployment Benefit Duration Affect the Inflow into Unemployment," IZA Discussion Papers 4691, Institute for the Study of Labor (IZA).

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