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The Effect of Unemployment Insurance on Unemployment Duration and the Subsequent Employment Stability

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Author Info
Tatsiramos, Konstantinos () (European University Institute, CentER, Tilburg University and IZA Bonn)

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Abstract

This paper studies the effect of unemployment benefits on the unemployment and subsequent employment duration using individual data from the European Community Household Panel, for France, Germany, and the UK. The empirical analysis is based on a two-state mixed proportional hazard model allowing for flexible duration dependence and state specific unobserved heterogeneity. We find that recipients, relative to non-recipients, face lower exit rates from unemployment, while an additional month in unemployment increases their subsequent employment stability. This positive correlation between previous unemployment and subsequent employment duration for the recipients is statistically significant for the short-term unemployed in France and Germany. The results indicate that in these two countries, which provide more generous benefits relative to the UK, recipients who search for a longer period within the first year in unemployment obtain higher employment stability.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1163.

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Length: 43 pages
Date of creation: May 2004
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Handle: RePEc:iza:izadps:dp1163

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Related research
Keywords: unemployment insurance; unemployment duration; employment duration; duration analysis;

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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
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis

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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. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier. [Downloadable!] (restricted)
    Other versions:
  2. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July. [Downloadable!] (restricted)
    Other versions:
  3. Jurajda, Stepan, 2002. "Estimating the effect of unemployment insurance compensation on the labor market histories of displaced workers," Journal of Econometrics, Elsevier, vol. 108(2), pages 227-252, June. [Downloadable!] (restricted)
    Other versions:
  4. Addison, John T. & Blackburn, McKinley L., 2000. "The effects of unemployment insurance on postunemployment earnings," Labour Economics, Elsevier, vol. 7(1), pages 21-53, January. [Downloadable!] (restricted)
  5. Van den Berg, Gerard J., 2000. "Duration Models: Specification, Identification, and Multiple Durations," MPRA Paper 9446, University Library of Munich, Germany. [Downloadable!]
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  6. Olympia Bover & Manuel Arellano & Samuel Bentolila, 2002. "Unemployment Duration, Benefit Duration and the Business Cycle," Economic Journal, Royal Economic Society, vol. 112(479), pages 223-265, April. [Downloadable!] (restricted)
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  7. 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)
  8. Christian Belzil, 2001. "Unemployment Insurance and Subsequent Job Duration: Job Matching vs Unobserved Heterogeneity," CIRANO Working Papers 2001s-21, CIRANO. [Downloadable!]
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  9. Marimon, R. & Zilibotti, F., 1998. "Unemployment vs. Mismatch of Talents," Papers 661, Stockholm - International Economic Studies.
  10. Michael Baker & Samuel A. Rea, 1998. "Employment Spells And Unemployment Insurance Eligibility Requirements," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 80-94, February. [Downloadable!] (restricted)
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  11. Ehrenberg, Ronald G & Oaxaca, Ronald L, 1976. "Unemployment Insurance, Duration of Unemployment, and Subsequent Wage Gain," American Economic Review, American Economic Association, vol. 66(5), pages 754-66, December. [Downloadable!] (restricted)
  12. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 325-53, July. [Downloadable!] (restricted)
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  13. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-57, October. [Downloadable!] (restricted)
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