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

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  • Tatsiramos, Konstantinos

    ()
    (University of Nottingham)

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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Bibliographic 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
Date of revision:
Handle: RePEc:iza:izadps:dp1163

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Related research

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

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References

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  1. Van den Berg, Gerard J., 2000. "Duration Models: Specification, Identification, and Multiple Durations," MPRA Paper 9446, University Library of Munich, Germany.
  2. Christian Belzil, 2001. "Unemployment Insurance and Subsequent Job Duration: Job Matching vs Unobserved Heterogeneity," CIRANO Working Papers 2001s-21, CIRANO.
  3. 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.
  4. Arellano, Manuel & Bentolila, Samuel & Bover, Olympia, 1998. "Unemployment Duration, Benefit Duration and the Business Cycle," CEPR Discussion Papers 1840, C.E.P.R. Discussion Papers.
  5. 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.
  6. Marimon, R. & Zilibotti, F., 1998. "Unemployment vs. Mismatch of Talents," Papers 661, Stockholm - International Economic Studies.
  7. 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.
  8. John C. Ham & Samuel Rea, 1986. "Unemployment Insurance and Male Unemployment Duration in Canada," Working Papers 592, Princeton University, Department of Economics, Industrial Relations Section..
  9. Michael Baker & Samuel A. Rea, Jr., 1994. "Employment Spells and Unemployment Insurance Eligibility Requirements," Working Papers reas-95-02, University of Toronto, Department of Economics.
  10. 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.
  11. Bruce D. Meyer, 1991. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  12. 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.
  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.
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Citations

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Cited by:
  1. Milan Vodopivec, 2013. "Introducing unemployment insurance to developing countries," IZA Journal of Labor Policy, Springer, vol. 2(1), pages 1-23, December.
  2. Emmanuel Duguet & Florent Frémigacci & Yannick L’Horty, 2008. "Indemnisation du chômage et retour à l’emploi : un examen économétrique," Documents de recherche 08-07, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  3. van Ours, Jan C. & Vodopivec, Milan, 2008. "Does reducing unemployment insurance generosity reduce job match quality?," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 684-695, April.

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