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Timed to say goodbye: Does unemployment benefit eligibility affect worker layoffs?

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  • Andrea Albanese

    (Luxembourg Institute of Socio-Economic Research, Labour Market Department, Luxembourg; Department of Economics, Ghent University, Ghent, Belgium; IZA - Institute of Labor Economics, Bonn, Germany)

  • Corinna Ghirelli

    (Bank of Spain)

  • Matteo Picchio

    (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche)

Abstract

We study how unemployment benefit eligibility affects the layoff exit rate by exploiting quasiexperimental variation in eligibility rules in Italy. By using a difference-in-differences estimator, we find an instantaneous increase of about 12% in the layoff probability when unemployment benefit eligibility is attained, which persists for about 16 weeks. These findings are robust to different identifying assumptions and are mostly driven by jobs started after the onset of the Great Recession, in the South and for small firms. We argue that the moral hazard from the employer's side is the main force driving these layoffs.

Suggested Citation

  • Andrea Albanese & Corinna Ghirelli & Matteo Picchio, 2019. "Timed to say goodbye: Does unemployment benefit eligibility affect worker layoffs?," Working Papers 436, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  • Handle: RePEc:anc:wpaper:436
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    Cited by:

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    2. Laura Khoury & Clément Brébion & Simon Briole, 2019. "Entitled to Leave: the Impact of Unemployment Insurance Eligibility on Employment Duration and Job Quality," Working Papers halshs-02393383, HAL.
    3. Garcia-Louzao, Jose, 2022. "Workers’ job mobility in response to severance pay generosity," Labour Economics, Elsevier, vol. 75(C).
    4. Goensch, Johannes & Gulyas, Andreas & Kospentaris, Ioannis, 2024. "Worker mobility and UI extensions," European Economic Review, Elsevier, vol. 162(C).
    5. Khoury, Laura, 2023. "Unemployment benefits and redundancies: Incidence and timing effects," Journal of Public Economics, Elsevier, vol. 226(C).
    6. Arranz, José M. & García-Serrano, Carlos, 2020. "Does unemployment benefit duration affect inflows into unemployment? The impact of a law change for older workers," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    7. Giulia Giupponi & Camille Landais & Alice Lapeyre, 2022. "Should We Insure Workers or Jobs during Recessions?," Journal of Economic Perspectives, American Economic Association, vol. 36(2), pages 29-54, Spring.
    8. Luca Bonacini & Giovanni Gallo & Sergio Scicchitano, 2021. "Working from home and income inequality: risks of a ‘new normal’ with COVID-19," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(1), pages 303-360, January.

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    More about this item

    Keywords

    Unemployment insurance; layoffs; employer-employee moral hazard; difference-in-differences; heterogeneous effects.;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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