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The effect of unemployment benefits on re-employment rates: evidence from the Finnish UI-benefit reform

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  • Uusitalo, Roope

    () (Labour Institute for Economic Research)

  • Verho, Jouko

    () (Department of Economics, University of Helsinki)

Abstract

In January 2003, the unemployment benefits in Finland were increased for workers with long employment histories. The average benefit increase was 15 per cent for the first 150 days of the unemployment spell. In this paper we evaluate the effect of the benefit increase on the duration of unemployment by comparing the changes in the re-employment hazard profiles among the unemployed who became eligible for the increased benefits to the changes in a comparison group whose benefit structure remained unchanged. We find that the benefit increase reduced the re-employment hazards at the beginning of the unemployment spell. The effect disappears after the eligibility period for the increased benefit expires.

Suggested Citation

  • Uusitalo, Roope & Verho, Jouko, 2007. "The effect of unemployment benefits on re-employment rates: evidence from the Finnish UI-benefit reform," Working Paper Series 2007:21, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  • Handle: RePEc:hhs:ifauwp:2007_021
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    References listed on IDEAS

    as
    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. Tomi Kyyrä & Ralf A. Wilke, 2007. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 154-182, March.
    3. 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.
    4. Helge Bennmarker & Kenneth Carling & Bertil Holmlund, 2007. "Do Benefit Hikes Damage Job Finding? Evidence from Swedish Unemployment Insurance Reforms," LABOUR, CEIS, vol. 21(1), pages 85-120, March.
    5. 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.
    6. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, December.
    7. Kyyrä, Tomi, 1999. "Post-Unemployment Wages and Economic Incentives to Exit from Unemployment," Research Reports 56, VATT Institute for Economic Research.
    8. Juha Kettunen, 1993. "Increasing incentives for reemployment," Finnish Economic Papers, Finnish Economic Association, vol. 6(1), pages 51-60, Spring.
    9. Bruce D. Meyer & Wallace K. C. Mok, 2007. "Quasi-Experimental Evidence on the Effects of Unemployment Insurance from New York State," NBER Working Papers 12865, National Bureau of Economic Research, Inc.
    10. Hakola, Tuulia & Uusitalo, Roope, 2005. "Not so voluntary retirement decisions? Evidence from a pension reform," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2121-2136, December.
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    Cited by:

    1. Laszlo Goerke & Markus Pannenberg & Heinrich Ursprung, 2010. "A positive theory of the earnings relationship of unemployment benefits," Public Choice, Springer, vol. 145(1), pages 137-163, October.
    2. Niklas Potrafke, 2010. "Labor market deregulation and globalization: empirical evidence from OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(3), pages 545-571, September.
    3. Uusitalo, Roope & Verho, Jouko, 2010. "The effect of unemployment benefits on re-employment rates: Evidence from the Finnish unemployment insurance reform," Labour Economics, Elsevier, vol. 17(4), pages 643-654, August.
    4. Martin Schindler & Mariya Aleksynska, 2011. "Labor Market Regulations in Low-, Middle- and High-Income Countries; A New Panel Database," IMF Working Papers 11/154, International Monetary Fund.

    More about this item

    Keywords

    Unemployment insurance; duration models;

    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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