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How Changes in Benefits Entitlement Affect the Duration of Unemployment

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  • van Ours, Jan C
  • Vodopivec, Milan

Abstract

This paper investigates the disincentive effects of the potential duration of unemployment insurance (UI) benefits. The disincentive effects are identified by exploiting changes in the UI system in Slovenia, which involved substantial reductions in the potential benefit duration and had characteristics of a ‘natural experiment’. We find that the change had a positive effect on the exit rate out of unemployment – both to employment and to other destinations – at various durations of unemployment spells and for many categories of unemployed workers.

Suggested Citation

  • van Ours, Jan C & Vodopivec, Milan, 2005. "How Changes in Benefits Entitlement Affect the Duration of Unemployment," CEPR Discussion Papers 4962, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4962
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    1. Rafael Lalive & Jan Van Ours & Josef Zweimuller, 2006. "How Changes in Financial Incentives Affect the Duration of Unemployment," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 1009-1038.
    2. 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.
    3. 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.
    4. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
    5. Lalive, Rafael & Zweimuller, Josef, 2004. "Benefit entitlement and unemployment duration: The role of policy endogeneity," Journal of Public Economics, Elsevier, vol. 88(12), pages 2587-2616, December.
    6. Van den Berg, Gerard J., 2001. "Duration models: specification, identification and multiple durations," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 55, pages 3381-3460, Elsevier.
    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. 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).
    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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    Cited by:

    1. Stovicek, Klara & Turrini, Alessandro, 2012. "Benchmarking Unemployment Benefits in the EU," IZA Policy Papers 43, Institute of Labor Economics (IZA).
    2. Howell David R. & Baker Dean & Glyn Andrew & Schmitt John, 2007. "Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence," Capitalism and Society, De Gruyter, vol. 2(1), pages 1-73, May.
    3. David R. Howell & Dean Baker & Andrew Glyn & John Schmitt, 2006. "Are Protective Labor Market Institutions Really at the Root of Unemployment? A Critical Perspective on the Statistical Evidence," CEPR Reports and Issue Briefs 2006-14, Center for Economic and Policy Research (CEPR).
    4. Andrew C. Johnston & Alexandre Mas, 2018. "Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2480-2522.
    5. William Gbohoui, 2019. "Structural Unemployment in Luxembourg: Bad Luck or Rational Choice?," IMF Working Papers 2019/243, International Monetary Fund.

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    More about this item

    Keywords

    job finding rates; potential benefit duration; unemployment insurance;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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