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How Changes in Benefits Entitlement Affect Job-Finding: Lessons from the Slovenian "Experiment"

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  • van Ours, Jan C.

    ()
    (Tilburg University)

  • Vodopivec, Milan

    ()
    (International School for Social and Business Studies, Celje, Slovenia)

Abstract

In 1998 the Slovenian UI system was drastically reformed. The reform reduced the potential duration of unemployment benefits substantially and simultaneously improved employment services offered to, and monitoring of, the recipients. We find that the reduction in potential benefit duration had a positive effect on the exit rate out of unemployment – both to employment and to other destinations – at various durations of unemployment spells and for many categories of unemployed workers. We also identify a clear spike in the exit rate out of unemployment in the month unemployment benefits expire (and a smaller spike in the month thereafter), and for males an increase of job-finding rate in the third month of unemployment, a likely consequence of a reduction of the level of benefit that occurs at that point. Interestingly, post-unemployment wages of recipients were not affected after the change of the law, suggesting that higher job-finding rates following the reduction of benefits were not produced by reduced reservation wages (higher acceptance probability) but rather more effective job-search activity.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1181.

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Length: 48 pages
Date of creation: Jun 2004
Date of revision:
Publication status: published in: Journal of Labor Economics, 2006, 24 (2), 351-378
Handle: RePEc:iza:izadps:dp1181

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Keywords: post-unemployment wages; unemployment insurance; potential benefit duration; job finding rates;

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References

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  1. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 5(3), pages 325-53, July.
  2. 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.
  3. Stephen Klasen & Ingrid Woolard, 2005. "Surviving unemployment without state support: Unemployment and household formation in South Africa," SALDRU/CSSR Working Papers 129, Southern Africa Labour and Development Research Unit, University of Cape Town.
  4. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198284345, October.
  5. Vodopivec, Milan & Worgotter, Andreas & Raju, Dhushyanth, 2003. "Unemployment benefit systems in Central and Eastern Europe : a review of the 1990s," Social Protection Discussion Papers 26307, The World Bank.
  6. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, Elsevier, vol. 28(1), pages 85-101, April.
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Citations

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Cited by:
  1. Rosholm, Michael & Vejlin, Rune Majlund, 2007. "Reducing Income Transfers to Refugee Immigrants: Does Starthelp Help You Start?," IZA Discussion Papers 2720, Institute for the Study of Labor (IZA).
  2. Mário Centeno & Álvaro A. Novo, 2007. "Identifying Unemployment Insurance Income Effects with a Quasi-Natural Experiment," Working Papers, Banco de Portugal, Economics and Research Department w200710, Banco de Portugal, Economics and Research Department.
  3. van Ours, Jan C & Vodopivec, Milan, 2005. "How Changes in Benefits Entitlement Affect the Duration of Unemployment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4962, C.E.P.R. Discussion Papers.
  4. Konle-Seidl, Regina, 2005. "Lessons learned: Internationale Evaluierungsergebnisse zu Wirkungen aktiver und aktivierender Arbeitsmarktpolitik," IAB-Forschungsbericht, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] 200509, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  5. Emmanuel Duguet & Florent Frémigacci & Yannick L’Horty, 2008. "Indemnisation du chômage et retour à l’emploi : un examen économétrique," Documents de recherche, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne 08-07, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  6. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "Unemployment and vacancy fluctuations in the matching model: inspecting the mechanism," Economic Quarterly, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue Sum, pages 19-50.
  7. Card, David & Chetty, Raj & Weber, Andrea, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," IZA Discussion Papers 2590, Institute for the Study of Labor (IZA).
  8. Mário Centeno & Álvaro A. Novo, 2007. "The Regressivity of Unemployment Insurance: Identification of the Income Effect Through the July 1999 Legislation," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department, Banco de Portugal, Economics and Research Department.
  9. Kuddo, Arvo, 2009. "Labor laws in Eastern European and Central Asian countries : minimum norms and practices," Social Protection Discussion Papers 51698, The World Bank.

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