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Does cutting the value of unemployment insurance benefits affect take-up? Evidence from Hungary

Author

Listed:
  • Márton Csillag

    (HUN-REN Centre for Economic and Regional Studies, Budapest Institute for Policy Analysis)

  • Balázs Munkácsy

    (Budapest Institute for Policy Analysis)

  • Ágota Scharle

    (Budapest Institute for Policy Analysis)

Abstract

Does a drastic cut in in potential benefit duration affect the take-up of unemployment insurance benefits among those eligible? We evaluate a policy change reducing the maximum length of UI benefits from 9 to 3 months in Hungary at the end of 2011. We rely on rich longitudinal matched administrative data, which allows us to obtain information on a large sample of job losers, and precisely estimate eligibility for UI benefits. We find that slightly less than 60 percent of UI eligible individuals claim benefits, and that while the length of benefit entitlement is only slightly positively correlated with taking up benefits, UI claiming rate tends to increase with previous earnings. We show that the proportion of UI benefit claims fell only slightly (by 1.5 – 2 percentage points), but this effect was more pronounced for those with the largest potential losses in UI value. This moderate effect might be related to the fact that the reform essentially got rid of the period of flat-rate UI benefits, while keeping the period when UI benefits were proportional to previous earnings roughly unchanged. At the same time, UI take-up decreased among those with low earnings (around the minimum wage) but stable employment, a group with likely little savings, which is alarming from a social policy perspective.

Suggested Citation

  • Márton Csillag & Balázs Munkácsy & Ágota Scharle, 2023. "Does cutting the value of unemployment insurance benefits affect take-up? Evidence from Hungary," KRTK-KTI WORKING PAPERS 2336, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:2336
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    References listed on IDEAS

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    1. Anderson, Patricia M. & Meyer, Bruce D., 2000. "The effects of the unemployment insurance payroll tax on wages, employment, claims and denials," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 81-106, October.
    2. John Micklewright & Gyula Nagy, 1994. "How does the Hungarian unemployment insurance system really work?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(2), pages 209-232, June.
    3. Wonsik Ko & Robert A. Moffitt, 2022. "Take-up of Social Benefits," NBER Working Papers 30148, National Bureau of Economic Research, Inc.
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    5. Elira Kuka & Bryan A. Stuart, 2021. "Racial Inequality in Unemployment Insurance Receipt and Take-Up," NBER Working Papers 29595, National Bureau of Economic Research, Inc.
    6. Micklewright, John & Nagy, Gyula, 1996. "Labour market policy and the unemployed in Hungary," European Economic Review, Elsevier, vol. 40(3-5), pages 819-828, April.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • 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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