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How Shortening the Potential Duration of Unemployment Benefits Affects the Duration of Unemployment: Evidence from a Natural Experiment

  • Jan C. van Ours

    (Tilburg University, CentER, IZA, and CEPR)

  • Milan Vodopivec

    (World Bank)

In this article we investigate the disincentive effects of shortening the potential duration of unemployment insurance (UI) benefits. We identify these disincentive effects by exploiting changes in Slovenia's unemployment insurance system—a "natural experiment" that involved substantial reductions in the potential duration of benefits for four groups of workers plus no change in benefits for another group (which served as a natural control). We find that the change had a positive effect on the exit rate from unemployment—to new jobs and other options—for unemployment spells of various lengths and for several categories of unemployed workers.

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File URL: http://dx.doi.org/10.1086/499976
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 24 (2006)
Issue (Month): 2 (April)
Pages: 351-378

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Handle: RePEc:ucp:jlabec:v:24:y:2006:i:2:p:351-384
Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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  1. Ours, Jan van & Vodopivec, Milan, 2005. "How changes in benefits entitlement affect job-finding: lessons from the slovenian experiment," Social Protection and Labor Policy and Technical Notes 32548, The World Bank.
  2. Lalive, R. & van Ours, J.C. & Zweimüller, J., 2004. "How Changes in Financial Incentives Affect the Duration of Unemployment," Discussion Paper 2004-86, Tilburg University, Center for Economic Research.
  3. Addison, John T. & Portugal, Pedro, 2004. "How Does the Unemployment Insurance System Shape the Time Profile of Jobless Duration?," IZA Discussion Papers 978, Institute for the Study of Labor (IZA).
  4. Lalive, Rafael & Zweimüller, Josef, 2002. "Benefit Entitlement and Unemployment Duration: The Role of Policy Endogeneity," CEPR Discussion Papers 3363, C.E.P.R. Discussion Papers.
  5. 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.
  6. Dale T. Mortensen, 1977. "Unemployment Insurance and Job Search Decisions," ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  7. Knut Roed & Tao Zhang, 2003. "Does Unemployment Compensation Affect Unemployment Duration?," Economic Journal, Royal Economic Society, vol. 113(484), pages 190-206, January.
  8. Carling, Kenneth & Edin, Per-Anders & Harkman, Anders & Holmlund, Bertil, 1996. "Unemployment duration, unemployment benefits, and labor market programs in Sweden," Journal of Public Economics, Elsevier, vol. 59(3), pages 313-334, March.
  9. 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.
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