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Do benefit cuts boost job findings? Swedish evidence from the 1990s

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Author Info
Carling, Kenneth () (IFAU - Office of Labour Market Policy Evaluation)
Holmlund, Bertil () (IFAU - Office of Labour Market Policy Evaluation)
Vejsiu, Altin (IFAU - Office of Labour Market Policy Evaluation)

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Abstract

In June 1995, the Swedish parliament decided to cut the replacement rate in unemployment insurance from 80 percent to 75 percent, a change that took effect on January 1, 1996. This paper examines how this change affected job finding rates among unemployed insured individuals. To identify the effect of the policy we exploit a qasiexperimental feature of the benefit cut: only a fraction of the unemployed was affected by the reduction in replacement rates. We compare the evolution of job finding rates before and after the reform among those affected and those not affected. Our estimates suggest that the reform caused an increase in the transition rate of roughly 10 percent. There is also evidence of anticipatory behavior among the unemployed; the effects of the reform seem to operate several months before its actual implementation in January 1996.

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Publisher Info
Paper provided by IFAU - Institute for Labour Market Policy Evaluation in its series Working Paper Series with number 1999:8.

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Length: 34 pages
Date of creation: 01 Nov 1999
Date of revision:
Publication status: Published in Economic Journal, 2001, pages 766-790.
Handle: RePEc:hhs:ifauwp:1999_008

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Postal: Labour Market Policy Evaluation, P O Box 513, SE-751 20 Uppsala, Sweden
Phone: (+46) 18 - 471 70 70
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Related research
Keywords: Unemployment duration; Unemployment benefits;

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Find related papers by JEL classification:
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Edin, Per-Anders & Fredriksson, Peter, 2000. "LINDA - Longitudinal INdividual DAta for Sweden," Working Paper Series 2000:19, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  2. Atkinson, A. B. & Gomulka, J. & Micklewright, J. & Rau, N., 1984. "Unemployment benefit, duration and incentives in Britain : How robust is the evidence?," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 3-26. [Downloadable!] (restricted)
  3. van den Berg, Gerard J, 1994. "The Effects of Changes of the Job Offer Arrival Rate on the Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 478-98, July. [Downloadable!] (restricted)
  4. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July. [Downloadable!] (restricted)
    Other versions:
  5. Albrecht, James W & Axell, Bo, 1984. "An Equilibrium Model of Search Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 824-40, October. [Downloadable!] (restricted)
    Other versions:
  6. Narendranathan, W. & Stewart, M.B., 1989. "Modelling The Probability Of Leaving Unemployment: Competing Risks Models With Flexible Baseline Hazards," The Warwick Economics Research Paper Series (TWERPS) 331, University of Warwick, Department of Economics.
  7. Axell, Bo & Lang, Harald, 1990. " The Effects of Unemployment Compensation in General Equilibrium with Search Unemployment," Scandinavian Journal of Economics, Blackwell Publishing, vol. 92(4), pages 531-40.
  8. Carling, Kenneth & Soderberg, Hans, 1998. "An experimental comparison of gradient methods in econometric duration analysis," Computational Statistics & Data Analysis, Elsevier, vol. 27(1), pages 83-97, March. [Downloadable!] (restricted)
  9. Holmlund, Bertil, 1998. " Unemployment Insurance in Theory and Practice," Scandinavian Journal of Economics, Blackwell Publishing, vol. 100(1), pages 113-41, March. [Downloadable!] (restricted)
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  10. Jaap H. Abbring & Gerard J. Berg & Jan C. Ours, 2005. "The Effect of Unemployment Insurance Sanctions on the Transition Rate from Unemployment to Employment," Economic Journal, Royal Economic Society, vol. 115(505), pages 602-630, 07. [Downloadable!] (restricted)
    Other versions:
  11. van den Berg, Gerard J, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Blackwell Publishing, vol. 57(2), pages 255-77, April. [Downloadable!] (restricted)
  12. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
    Other versions:
  14. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December. [Downloadable!] (restricted)
  15. Toikka, Richard S, 1976. "A Markovian Model of Labor Market Decisions by Workers," American Economic Review, American Economic Association, vol. 66(5), pages 821-34, December. [Downloadable!] (restricted)
  16. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "Political sustainability and the design of social insurance," Journal of Public Economics, Elsevier, vol. 75(3), pages 341-364, March. [Downloadable!] (restricted)
  17. Narendranathan, W & Nickell, S & Stern, J, 1985. "Unemployment Benefits Revisited," Economic Journal, Royal Economic Society, vol. 95(378), pages 307-29, June. [Downloadable!] (restricted)
  18. 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, vol. 59(3), pages 313-334, March. [Downloadable!] (restricted)
  19. Steiner, Viktor, 1997. "Extended benefit entitlement periods and the duration of unemployment in West Germany," ZEW Discussion Papers 97-14, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  20. Hunt, Jennifer, 1995. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 88-120, January. [Downloadable!] (restricted)
    Other versions:
  21. Bruce D. Meyer, 1989. "A Quasi-Experimental Approach to the Effects of Unemployment Insurance," NBER Working Papers 3159, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Larsson, Laura, 2002. "Sick of being unemployed? Interactions between unemployment and sickness insurance in Sweden," Working Paper Series 2002:6, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  2. Stephen Nickell, 2003. "A Picture of European Unemployment: Success and Failure," CEP Discussion Papers dp0577, Centre for Economic Performance, LSE. [Downloadable!]
  3. Roed,K. & Nordberg,M., 2001. "Temporary layoffs and the duration of unemployment," Memorandum 12/2001, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  4. Larsson, Laura, 2002. "Sick of Being Unemployed? Interactions Between Unemployment and Sickness Insurance in Sweden," Working Paper Series 2002:5, Uppsala University, Department of Economics. [Downloadable!]
  5. B. Dormont & D. Fougère & A. Prieto, 2001. "L'effet de l'allocation unique dégressive sur la reprise d'emploi," THEMA Working Papers 2001-05, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
  6. Bennmarker, Helge & Carling, Kenneth & Holmlund, Bertil, 2005. "Do benefit hikes damage job finding? Evidence from Swedish unemployment insurance reforms," Working Paper Series 2005:22, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
    Other versions:
  7. Roed,K. & Zhang,T., 2000. "Labour market transitions and economic incentives," Memorandum 15/2000, Oslo University, Department of Economics. [Downloadable!]
  8. Tomi Kyyrä & Ralf A. Wilke, 2006. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland Revised," Discussion Papers 396, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  9. Larsson, Laura, 2004. "Harmonizing unemployment and sickness insurance: Why (not)?," Working Paper Series 2004:8, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  10. Iturriza, Ana & Bedi, Arjun S. & Sparrow, Robert, 2008. "Unemployment Assistance and Transition to Employment in Argentina," IZA Discussion Papers 3579, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Sacklén, Hans, 2002. "An evaluation of the Swedish trainee replacement schemes," Working Paper Series 2002:7, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  12. Bergemann, Annette & van den Berg, Gerard J., 2008. "From Giving Birth to Paid Labor: The Effects of Adult Education for Prime-Aged Mothers," IZA Discussion Papers 3600, Institute for the Study of Labor (IZA). [Downloadable!]
  13. Konle-Seidl, Regina, 2005. "Lessons learned: Internationale Evaluierungsergebnisse zu Wirkungen aktiver und aktivierender Arbeitsmarktpolitik," IAB-Forschungsbericht 200509, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  14. Kyyrä, Tomi & Wilke, Ralf A., 2004. "Reduction in the Long-Term Unemployment of the Elderly : A Success Story from Finland," ZEW Discussion Papers 04-63, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
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