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The effect of unemployment benefits on re-employment rates: Evidence from the Finnish unemployment insurance reform

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  • Uusitalo, Roope
  • Verho, Jouko

Abstract

In January 2003, the unemployment benefits in Finland were increased for workers with long employment histories. The average benefit increase was 15% for the first 150Â days of the unemployment spell. At the same time severance pay system was abolished. In this paper we evaluate the effect of the change in the benefit structure on the duration of unemployment by comparing the changes in the re-employment hazard profiles among the unemployed who were affected by the reform to the changes in a comparison group whose benefit structure remained unchanged. We find that the change in the benefit structure reduced the re-employment hazards by on average 17%. The effect is largest at the beginning of the unemployment spell and disappears after the eligibility period for the increased benefits expires.

Suggested Citation

  • Uusitalo, Roope & Verho, Jouko, 2010. "The effect of unemployment benefits on re-employment rates: Evidence from the Finnish unemployment insurance reform," Labour Economics, Elsevier, vol. 17(4), pages 643-654, August.
    • Handle: RePEc:eee:labeco:v:17:y:2010:i:4:p:643-654
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    Citations

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    Cited by:

    1. Wiljan van den Berge, 2016. "How do severance pay and job search assistance jointly affect unemployment duration and job quality?," CPB Discussion Paper 334, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Kyyrä, Tomi & Pesola, Hanna, 2017. "Estimating the Effects of Potential Benefit Duration without Variation in the Maximum Duration of Unemployment Benefits," IZA Discussion Papers 10799, Institute for the Study of Labor (IZA).
    3. Ioana C. Salagean & Nicholas T. Longford, 2013. "The effect of unemployment benefits on labour market behaviour in Luxembourg," Statistics in Transition new series, Główny Urząd Statystyczny (Polska), vol. 14(2), pages 249-272, June.
    4. Rebollo-Sanz, Yolanda Fatima & Rodríguez-Planas, Núria, 2016. "When the Going Gets Tough... Financial Incentives, Duration of Unemployment and Job-Match Quality," IZA Discussion Papers 10044, Institute for the Study of Labor (IZA).
    5. repec:wsi:jicepx:v:08:y:2017:i:01:n:s1793993317500028 is not listed on IDEAS
    6. Martin Gonzalez-Rozada & Hernan Ruffo, 2014. "The Effects of Unemployment Insurance Under High Informality: Evidence from Argentina," Department of Economics Working Papers wp201403, Universidad Torcuato Di Tella.
    7. Florent Fremigacci, 2010. "Maximum Benefits Duration and Older Workers’Transitions out of Unemployment : a Regression Discontinuity Approach," Documents de recherche 10-12, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    8. Kyyrä, Tomi & Pesola, Hanna, 2017. "The Effects of UI Benefits on Unemployment and Subsequent Outcomes: Evidence from a Kinked Benefit Rule," IZA Discussion Papers 10484, Institute for the Study of Labor (IZA).
    9. Aida Caldera Sánchez & Alain de Serres & Naomitsu Yashiro, 2016. "Reforming in a difficult macroeconomic context: A review of the issues and recent literature," OECD Economics Department Working Papers 1297, OECD Publishing.
    10. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    11. Le Barbanchon, Thomas, 2016. "The effect of the potential duration of unemployment benefits on unemployment exits to work and match quality in France," Labour Economics, Elsevier, vol. 42(C), pages 16-29.
    12. Simoes, Nadia, 2013. "Subsídio de desemprego: uma revisão da literatura teórica e empírica
      [Unemployment insurance: a survey]      ," MPRA Paper 52332, University Library of Munich, Germany.
    13. Moral-Arce, Ignacio & Martín-Román, Javier & Martín-Román, Ángel L., 2018. "Cessation of activity benefit of Spanish self-employed workers: a heterogeneous impact evaluation," MPRA Paper 85111, University Library of Munich, Germany.

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