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Unemployment, Welfare Benefits and the Financial Incentive to Work

Author

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  • Richard Layte

    (The Economic and Social Research Institute)

  • Tim Callan

    (The Economic and Social Research Institute)

Abstract

Although disincentive effects associated with payments have been regulaly found in research in the US and UK, the UK research is disputed and effects have been notable by their absence in studies from Continental Europe. However, much of this research has been hindered by inadequate models of the structure of payments and estimates of in work incomes. In this paper we explicitly model the structue of benefit payments over time and estimate in work income using the SWITCH tax/benefit model. We find that the hazard of exit from unemployment is negatively related to unemployment payments, but distinctive effects appear to influence only those receiving Unemployment Benefts (UB) and are small when compared internationally. Moreover, the exit rate increases for this group as exhaustion approaches at 15 months duration. We find no significant distinctive effects amongst those receiving Unemployment Assistance (UA).

Suggested Citation

  • Richard Layte & Tim Callan, 2001. "Unemployment, Welfare Benefits and the Financial Incentive to Work," The Economic and Social Review, Economic and Social Studies, vol. 32(2), pages 103-129.
  • Handle: RePEc:eso:journl:v:32:y:2001:i:2:p:103-129
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    File URL: http://www.esr.ie/Vol32_2callan.pdf
    File Function: First version, 2001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Brendan M. Walsh, 2004. "The transformation of the Irish labour market : 1980-2003," Working Papers 200412, School of Economics, University College Dublin.
    2. Brendan M. Walsh, 2004. "The transformation of the Irish labour market : 1980-2003," Open Access publications 10197/1542, School of Economics, University College Dublin.
    3. Callan, Tim & Keeney, Mary J. & Walsh, John R., 2002. "The Distributive Impact of Budgetary Policy: A Medium-Term View," Papers BP2003/3, Economic and Social Research Institute (ESRI).
    4. Trine Filges & Lars Pico Geerdsen & Anne‐Sofie Due Knudsen & Anne‐Marie Klint Jørgensen & Krystyna Kowalski, 2013. "Unemployment Benefit Exhaustion: Incentive Effects on Job Finding Rates: A Systematic Review," Campbell Systematic Reviews, John Wiley & Sons, vol. 9(1), pages 1-104.
    5. Schäfer, Holger, 2002. "Lohnversicherung: Ein Vorschlag zur Reform der Arbeitslosenversicherung," IW-Trends – Vierteljahresschrift zur empirischen Wirtschaftsforschung, Institut der deutschen Wirtschaft (IW) / German Economic Institute, vol. 29(3), pages 11-19.
    6. Brendan M. Walsh, 2002. "When unemployment disappears : Ireland in the 1990s," Working Papers 200229, School of Economics, University College Dublin.
    7. Layte, Richard & O'Connell, Philip J., 2005. "Profiling the Unemployed: An Analysis of the Galway and Waterford Live-Register Surveys," Research Series, Economic and Social Research Institute (ESRI), number PRS55, January.
    8. McQuinn, Kieran & Foley, Daniel & Kelly, Elish, 2016. "Quarterly Economic Commentary, Winter 2016," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20164.
    9. repec:esr:chaptr:jacb200207 is not listed on IDEAS
    10. Brendan Walsh, 2003. "When Unemployment Disappears: Ireland in the 1990s," CESifo Working Paper Series 856, CESifo.

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