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Do Benefit Hikes Damage Job Finding? Evidence from Swedish Unemployment Insurance Reforms

  • Bennmarker, Helge

    ()

    (Institute for Labour Market Policy Evaluation)

  • Carling, Kenneth

    ()

    (Institute for Labour Market Policy Evaluation)

  • Holmlund, Bertil

    ()

    (Department of Economics)

In 2001 and 2002, Sweden introduced several unemployment insurance reforms. A major innovation in the first reform was the introduction of a two-tiered benefit structure for some unemployed individuals. This system involved supplementary compensation during the first 20 weeks of unemployment. The 2002 reform retained the two-tiered benefit structure but involved also substantial benefit hikes for spells exceeding 20 weeks. This paper examines how these reforms affected transitions from unemployment to employment. We take advantage of the fact that the reforms had quasi-experimental features where the “treatments” differed considerably among unemployed individuals. We find that the reforms had strikingly different effects on job finding among men and women. The two reforms in conjunction are estimated to have increased the expected duration of unemployment among men but to have decreased the duration of unemployment among women. The overall effect on the duration of unemployment is not statistically different from zero. However, the reforms reduced job finding among males who remained unemployed for more than 20 weeks.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2005:15.

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Length: 37 pages
Date of creation: 29 Mar 2005
Date of revision:
Publication status: Published in LABOUR, 2007, pages 85-120.
Handle: RePEc:hhs:uunewp:2005_015
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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  1. Carling, Kenneth & Holmlund, Bertil & Vejsiu, Altin, 1999. "Do benefit cuts boost job findings? Swedish evidence from the 1990s," Working Paper Series 1999:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  2. Hamermesh, Daniel S, 1980. "Unemployment Insurance and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(3), pages 517-27, October.
  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. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
  5. Hamermesh, Daniel S, 1979. "Entitlement Effects, Unemployment Insurance and Employment Decisions," Economic Inquiry, Western Economic Association International, vol. 17(3), pages 317-32, July.
  6. Røed, Knut & Jensen, Peter & Thoursie, Anna, 2003. "Unemployment Duration, Incentives and Institutions - A Micro-Econometric Analysis Based on Scandinavian Data," Memorandum 09/2002, Oslo University, Department of Economics.
  7. Rafael Lalive & Josef Zweimüller, . "Benefit Entitlement and Unemployment Duration - The Role of Policy Endogeneity," IEW - Working Papers 112, Institute for Empirical Research in Economics - University of Zurich.
  8. Fredriksson, Peter & Holmlund, Bertil, 1998. "Optimal Unemployment Insurance in Search Equilibrium," Working Paper Series 1998:2, Uppsala University, Department of Economics.
  9. Lawrence F. Katz & Bruce D. Meyer, 1988. "The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment," NBER Working Papers 2741, National Bureau of Economic Research, Inc.
  10. 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.
  11. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  12. Knut Roed & Tao Zhang, 2003. "Does Unemployment Compensation Affect Unemployment Duration?," Economic Journal, Royal Economic Society, vol. 113(484), pages 190-206, January.
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