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

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  • Jan C. van Ours

    (Tilburg University, CentER, IZA, and CEPR)

  • Milan Vodopivec

    (World Bank)

Abstract

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.

Suggested Citation

  • Jan C. van Ours & Milan Vodopivec, 2006. "How Shortening the Potential Duration of Unemployment Benefits Affects the Duration of Unemployment: Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 351-378, April.
  • Handle: RePEc:ucp:jlabec:v:24:y:2006:i:2:p:351-384
    DOI: 10.1086/499976
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    References listed on IDEAS

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    1. Dale T. Mortensen, 1977. "Unemployment Insurance and Job Search Decisions," ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
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    3. van Ours, Jan C. & Vodopivec, Milan, 2004. "How Changes in Benefits Entitlement Affect Job-Finding: Lessons from the Slovenian "Experiment"," IZA Discussion Papers 1181, Institute of Labor Economics (IZA).
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    5. Rafael Lalive & Jan Van Ours & Josef Zweimuller, 2006. "How Changes in Financial Incentives Affect the Duration of Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 1009-1038.
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