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

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  • 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. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  2. McCall, B.P., 1993. "Unemployment Insurance Rules, Joblessness, and Part-Time Work," Papers 93-07, Minnesota - Industrial Relations Center.
  3. 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.
  4. 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, vol. 10(1), pages 99-115, January.
  5. James M. Poterba & Lawrence H. Summers, 1984. "Survey Response Variation in the Current Population Survey," NBER Working Papers 1109, National Bureau of Economic Research, Inc.
  6. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
  7. Narendranathan, W & Stewart, Mark B, 1993. "How Does the Benefit Effect Vary as Unemployment Spells Lengthen?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 361-81, Oct.-Dec..
  8. 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.
  9. Nickell, Stephen J, 1979. "Estimating the Probability of Leaving Unemployment," Econometrica, Econometric Society, vol. 47(5), pages 1249-66, September.
  10. McCall, Brian P, 1997. "The Determinants of Full-Time versus Part-Time Reemployment Following Job Displacement," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 714-34, October.
  11. 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.
  12. McCall, Brian P, 1994. "Testing the Proportional Hazards Assumption in the Presence of Unmeasured Heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(3), pages 321-34, July-Sept.
  13. 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.
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Citations

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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 2012:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  2. Rafael Lalive & Jan van Ours & Josef Zweimüller, . "How changes in Financial Incentives Affect the Duration of Unemployment," IEW - Working Papers 206, Institute for Empirical Research in Economics - University of Zurich.
  3. 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.
  4. Rafael Lalive & Jan Ours & Josef Zweimüller, 2011. "Equilibrium unemployment and the duration of unemployment benefits," Journal of Population Economics, Springer, vol. 24(4), pages 1385-1409, October.
  5. 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, vol. 5(1), pages 24-30, October.
  6. 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 2005-09, Bank of Estonia, revised 10 Oct 2005.
  7. Lalive, R. & Ours, J.C. van & Zweimüller, J., 2006. "How Changes in Potential Benefit Duration Affect Equilibrium Unemployment," Discussion Paper 2006-94, Tilburg University, Center for Economic Research.

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