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How Does the Unemployment Insurance System Shape the Time Profile of Jobless Duration?

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Author Info

  • Addison, John T.

    ()
    (University of South Carolina)

  • Portugal, Pedro

    ()
    (Banco de Portugal)

Abstract

This paper examines the effects of unemployment insurance on escape rates from unemployment using data from the 1998 Displaced Worker Survey. Transitions from unemployment to employment are modeled using a flexible representation of the baseline hazard function and allowing for discrete changes through time in the effects of unemployment insurance benefits, as well as those of the other covariates. The impact of unemployment insurance is also modeled using a time-varying benefits measure, namely, time to exhaustion of benefits. Potential biases stemming from reverse causation and unobserved individual heterogeneity are accommodated. Both approaches render transparent the major disincentive effects of access to benefits on re-employment rates while also providing evidence of time-varying effects of other regressors.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 978.

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Length: 27 pages
Date of creation: Jan 2004
Date of revision:
Publication status: published in: Economics Letters, 2004, 85 (2), 229-234
Handle: RePEc:iza:izadps:dp978

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Related research

Keywords: unemployment duration; time-varying coefficients/regressors; unemployment benefits;

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References

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  1. McCall, Brian P, 1994. "Testing the Proportional Hazards Assumption in the Presence of Unmeasured Heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 9(3), pages 321-34, July-Sept.
  2. McCall, Brian P, 1997. "The Determinants of Full-Time versus Part-Time Reemployment Following Job Displacement," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 15(4), pages 714-34, October.
  3. James M. Poterba & Lawrence H. Summers, 1983. "Survey Response Variation in the Current Population Survey," NBER Working Papers 1109, National Bureau of Economic Research, Inc.
  4. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  5. 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, Elsevier, vol. 41(1), pages 45-72, February.
  6. Nickell, Stephen J, 1979. "Estimating the Probability of Leaving Unemployment," Econometrica, Econometric Society, Econometric Society, vol. 47(5), pages 1249-66, September.
  7. Pedro Portugal & John T. Addison, 1990. "Problems of sample construction in studies of the effects of unemployment insurance on unemployment duration," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(4), pages 463-477, April.
  8. Narendranathan, W & Stewart, Mark B, 1993. "How Does the Benefit Effect Vary as Unemployment Spells Lengthen?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(4), pages 361-81, Oct.-Dec..
  9. Fallick, Bruce Chelimsky, 1991. "Unemployment Insurance and the Rate of Re-employment of Displaced Workers," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 228-35, May.
  10. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  11. McCall, Brian P, 1996. "Unemployment Insurance Rules, Joblessness, and Part-Time Work," Econometrica, Econometric Society, Econometric Society, vol. 64(3), pages 647-82, May.
  12. Anderson, Patricia M, 1992. "Time-Varying Effects of Recall Expectation, a Reemployment Bonus, and Job Counseling on Unemployment Durations," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 10(1), pages 99-115, January.
  13. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
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Cited by:
  1. Bennmarker, Helge & Nordström Skans, Oskar & Vikman, Ulrika, 2012. "Workfare for the old and long-term unemployed," Working Paper Series, Center for Labor Studies, Uppsala University, Department of Economics 2012:8, Uppsala University, Department of Economics.
  2. Ott-Siim Toomet, 2005. "Does an Increase in Unemployment Income Lead to Longer Unemployment Spells? Evidence Using Danish Unemployment Assistance Data," Bank of Estonia Working Papers, Bank of Estonia 2005-09, Bank of Estonia, revised 10 Oct 2005.
  3. Lalive, Rafael & van Ours, Jan C. & Zweimüller, Josef, 2004. "How Changes in Financial Incentives Affect the Duration of Unemployment," IZA Discussion Papers 1363, Institute for the Study of Labor (IZA).
  4. 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.
  5. Gunderson, Jill Marie & Hotchkiss, Julie L., 2007. "Job Separation Behavior of WOTC Workers: Results from a Unique Case Study," MPRA Paper 44801, University Library of Munich, Germany.
  6. Patrick Kline & Enrico Moretti, 2013. "People, Places and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs," NBER Working Papers 19659, National Bureau of Economic Research, Inc.
  7. Rafael Lalive & Jan Ours & Josef Zweimüller, 2011. "Equilibrium unemployment and the duration of unemployment benefits," Journal of Population Economics, Springer, Springer, vol. 24(4), pages 1385-1409, October.
  8. S. Nuray Akin & Brennan Platt, 2012. "Running Out of Time: Limited Unemployment Benefits and Reservation Wages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 149-170, April.
  9. Pedro Portugal & John Addison, 2004. "The European Labour Markets - Disincentive Effects of Unemployment Benefits on the Paths Out of Unemployment," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 5(1), pages 24-30, October.
  10. Eichhorst, Werner & Boeri, Tito & Braga, Michela & De Coen, An & Galasso, Vincenzo & Gerard, Maarten & Kendzia, Michael J. & Mayrhuber, Christine & Pedersen, Jakob Louis & Schmidl, Ricarda & Steiber, , 2013. "Report No. 53: Combining the Entry of Young People in the Labour Market with the Retention of Older Workers," IZA Research Reports 53, Institute for the Study of Labor (IZA).
  11. Lalive, R. & Ours, J.C. van & Zweimüller, J., 2006. "How Changes in Potential Benefit Duration Affect Equilibrium Unemployment," Discussion Paper, Tilburg University, Center for Economic Research 2006-94, Tilburg University, Center for Economic Research.
  12. Ott Toomet, 2005. "Does an increase in unemployment income lead to longer unemployment spells? Evidence using Danish unemployment assistance data," Economics Working Papers, School of Economics and Management, University of Aarhus 2005-07, School of Economics and Management, University of Aarhus.

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