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Unemployment Benefits and Redundancies: Incidence and Timing Effects

Author

Listed:
  • Laura Khoury

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

The literature on unemployment insurance (UI) has primarily focused on its impact on unemployment outflows. Using administrative data and a discontinuity in UI benefits at a job tenure threshold, I show that inflows also respond to the generosity of UI. Based on bunching estimates, I measure that 10% of layoffs in an 4-week window before the threshold are delayed, creating a bunching mass on the high-benefit side of the cutoff. Examining the mechanisms, the evidence suggests that employers and employees bargain over contract termination. Taken together, employers and employees show sophisticated reactions to UI with effects on employment duration. However, this retiming response accounts for a very small share of the fiscal externality of differentiating UI benefits at a tenure threshold, relative to the moral hazard cost.

Suggested Citation

  • Laura Khoury, 2023. "Unemployment Benefits and Redundancies: Incidence and Timing Effects," Post-Print hal-04285640, HAL.
    • Handle: RePEc:hal:journl:hal-04285640
    DOI: 10.1016/j.jpubeco.2023.104984
    Note: View the original document on HAL open archive server: https://hal.science/hal-04285640v1
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    Cited by:

    1. Richard Audoly, 2025. "Self‐Employment And Labor Market Risks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 66(2), pages 661-686, May.

    More about this item

    Keywords

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    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • 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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