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

  • Uusitalo, Roope
  • Verho, Jouko

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.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 4 (August)
Pages: 643-654

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Handle: RePEc:eee:labeco:v:17:y:2010:i:4:p:643-654
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Bennmarker, Helge & Carling, Kenneth & Holmlund, Bertil, 2005. "Do benefit hikes damage job finding? Evidence from Swedish unemployment insurance reforms," Working Paper Series 2005:22, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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  8. Uusitalo, Roope & Verho, Jouko, 2007. "The effect of unemployment benefits on re-employment rates: evidence from the Finnish UI-benefit reform," Working Paper Series 2007:21, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  9. Kyyrä, Tomi & Wilke, Ralf A., 2004. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," ZEW Discussion Papers 04-63, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  12. Carling, Kenneth & Holmlund, Bertil & Vejsiu, Altin, 1999. "Do Benefit Cuts Boost Job Findings? Swedish Evidence from the 1990s," Working Paper Series 1999:20, Uppsala University, Department of Economics.
  13. Card, David & Levine, Phillip B., 2000. "Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 107-138, October.
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  16. Raj Chetty, 2008. "Erratum: Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1197-1197, December.
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