Advanced Search
MyIDEAS: Login

Unemployment insurance and duration of unemployment : evidence from Slovenia's transition

Contents:

Author Info

  • Vodopivec, Milan

Abstract

Between 1990 and 1992 in Slovenia, recipients of unemployment insurance (UI) benefits tended to remain (formally) unemployed until their benefits expired, before taking a job. Institutional set-up suggests, and labor surveys show, that many of the recipients were actually working while collecting UI benefits. In the spirit, if not in the letter of the law, the UI system was abused. The author shows that the escape rate of the recipients of unemployment compensation to employment increased dramatically just before the potential exhaustion of unemployment benefits - and decreased equally dramatically after benefits were exhausted. When grouped by the potential duration of benefits, unemployment length varies significantly. The unemployed with longer potential benefits stay unemployed longer. Because these groups differ in their characteristics (for example, in age), this does not prove the"waiting behavior"of the recipients. However, exits to employment dramatically increase just before exhaustion - and that does prove waiting behavior. The pattern of an increased escape rate just before benefits are exhausted and its dramatic fall thereafter is more rigorously demonstrated using hazard model estimation. Possibilities for informal employment are abundant in Slovenia, and the environment of transition economies generally seems conducive to misuse of the UI system. Legislative loopholes and failure to enforce the labor code allowed the unemployed to work and to collect benefits. The monitoring of job searches was also lax. The author's calculations suggest that reducing the duration of benefits would reduce the incidence of unemployment, its duration, the amount spent on UI benefits, and the inefficiencies generated by raising taxes to finance unemployment insurance. At the same time, reducing the duration of benefits would not impair job matches or crowd out jobs for nonrecipients. True, despite increased efficiency generally, the workers with the least job mobility might suffer hardships for the least mobile group and greater efficiency generally would have to be resolved in the political sphere. Redesigning the system for better targeting would be less controversial. One way to reduce UI spending without seriously curtailing incentives to work would be to reduce the benefits in proportion to earnings from irregular work. Another possibility is stricter monitoring of the job searches of the unemployed. To reduce spending and make"double dipping"less attractive, old-age insurance could be removed from the package of benefits the UI system offers. Also, counselors who help the unemployed find jobs (and who may thus develop a close relationship with them) should perhaps not be expected to be able to make impartial decisions about disqualifications for benefits; someone else should do that. In addition to better targeting, a"benefit transfer program"- a voluntary program that converts UI benefits Also, counselors who help the unemployed find jobs (through vouchers) into hiring subsidies - seems particularly attractive for Slovenia and other transition economies. In a way, such a program would legalize the"double-dipping"that has been taking place in Slovenia and possibly elsewhere. It would legalize practices that have undermined the system's credibility. But it might improve fiscal savings while sustaining the incentive to find jobs.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1995/12/01/000009265_3961019160538/Rendered/PDF/multi0page.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1552.

as in new window
Length:
Date of creation: 31 Dec 1995
Date of revision:
Handle: RePEc:wbk:wbrwps:1552

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

Related research

Keywords: Economic Theory&Research; Environmental Economics&Policies; Labor Policies; Public Health Promotion; Health Monitoring&Evaluation; Environmental Economics&Policies; Youth and Governance; Health Monitoring&Evaluation; Labor Markets; Social Protections&Assistance;

References

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.:
as in new window
  1. 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.
  2. Orazem, Peter F. & Vodopivec, Milan, 1994. "Winners and losers in transition : returns to education, experience, and gender in Slovenia," Policy Research Working Paper Series 1342, The World Bank.
  3. Snower, Dennis J., 1994. "The Simple Economics of Benefit Transfers," CEPR Discussion Papers 1086, C.E.P.R. Discussion Papers.
  4. Hunt, Jennifer, 1995. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 88-120, January.
  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. Vodopivec, Milan & Hribar-Milic, Samo, 1993. "The Slovenian labor market in transition : issues and lessons learned," Policy Research Working Paper Series 1162, The World Bank.
  7. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Darja Boršič & Alenka Kavkler, 2009. "Modeling Unemployment Duration in Slovenia using Cox Regression Models," Transition Studies Review, Springer, vol. 16(1), pages 145-156, May.
  2. Natalia Smirnova, 2003. "Job Search Behavior of Unemployed in Russia," William Davidson Institute Working Papers Series 2003-629, William Davidson Institute at the University of Michigan.
  3. Pieter Serneels, 2002. "Explaining Non-Negative Duration Dependence Among the Unemployed," Economics Series Working Papers WPS/2002-13, University of Oxford, Department of Economics.
  4. Jan Boone & Jan Ours, 2012. "Why is There a Spike in the Job Finding Rate at Benefit Exhaustion?," De Economist, Springer, vol. 160(4), pages 413-438, December.
  5. David Card & Raj Chetty & Andrea Weber, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," NBER Working Papers 12893, National Bureau of Economic Research, Inc.
  6. Haltiwanger, John C. & Vodopivec, Milan, 1999. "Gross worker and job flows in a transition economy : an analysis of Estonia," Policy Research Working Paper Series 2082, The World Bank.
  7. Anne Lauringson, 2011. "Disincentive effects of unemployment insurance benefits: maximum benefit duration versus benefit level," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 11(1), pages 25-50, July.
  8. Vodopivec, Milan & Raju, Dhushyanth, 2002. "Income support systems for the unemployed : issues and options," Social Protection Discussion Papers 25529, The World Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1552. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.