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Working to Get Fired? Regression Discontinuity Effects of Unemployment Benefit Eligibility on Prior Employment Duration

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  • Martins, Pedro S.

    () (Queen Mary, University of London)

Abstract

In most countries, the unemployed are entitled to unemployment benefits only if they have previously worked a minimum period of time. This institutional feature creates a sharp change at eligibility in the disutility from unemployment and may distort the duration of jobs. In this paper, we evaluate this eligibility effect using a regression discontinuity approach. Our evidence is based on longitudinal social security data from Portugal, where the unemployed are required to work a relatively long period to collect benefits. We find that monthly transitions from employment to unemployment increase by 10% as soon as the eligibility condition is met. This result is driven entirely by transitions to subsidised unemployment, which increase by 20%, as non-subsidised unemployment is not affected. The effects are even larger for the unemployed with high replacement ratios or those who meet the eligibility condition from multiple short employment spells.

Suggested Citation

  • Martins, Pedro S., 2016. "Working to Get Fired? Regression Discontinuity Effects of Unemployment Benefit Eligibility on Prior Employment Duration," IZA Discussion Papers 10262, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10262
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    References listed on IDEAS

    as
    1. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
    2. Michael Baker & Samuel A. Rea, 1998. "Employment Spells And Unemployment Insurance Eligibility Requirements," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 80-94, February.
    3. David A. Green & Timothy Sargent, 1998. "Unemployment Insurance and Job Durations: Seasonal and Non-Seasonal Jobs," Canadian Journal of Economics, Canadian Economics Association, vol. 31(2), pages 247-278, May.
    4. Gary Solon, 1984. "The Effects of Unemployment Insurance Eligibility Rules on Job Quitting Behavior," Journal of Human Resources, University of Wisconsin Press, vol. 19(1), pages 118-126.
    5. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, April.
    6. Addison, John T. & Portugal, Pedro, 2008. "How do different entitlements to unemployment benefits affect the transitions from unemployment into employment?," Economics Letters, Elsevier, vol. 101(3), pages 206-209, December.
    7. Martins, Pedro S. & Pessoa e Costa, Sofia, 2014. "Reemployment and Substitution Effects from Increased Activation: Evidence from Times of Crisis," IZA Discussion Papers 8600, Institute for the Study of Labor (IZA).
    8. Pedro S. Martins, 2009. "Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 257-279, April.
    9. Martins, Pedro S., 2014. "30,000 Minimum Wages: The Economic Effects of Collective Bargaining Extensions," IZA Discussion Papers 8540, Institute for the Study of Labor (IZA).
    10. Christofides, Louis N & McKenna, C J, 1996. "Unemployment Insurance and Job Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 286-312, April.
    11. Pedro S. Martins & Sofia Pessoa e Costa, 2014. "Reemployment effects from increased activation: Evidence from times of crisis," Working Papers 52, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    12. Martins, Pedro S., 2016. "The Third Worker: Assessing the Trade-off between Employees and Contractors," IZA Discussion Papers 10222, Institute for the Study of Labor (IZA).
    13. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, April.
    14. Rebollo-Sanz, Yolanda, 2012. "Unemployment insurance and job turnover in Spain," Labour Economics, Elsevier, vol. 19(3), pages 403-426.
    15. Jurajda, Stepan, 2002. "Estimating the effect of unemployment insurance compensation on the labor market histories of displaced workers," Journal of Econometrics, Elsevier, vol. 108(2), pages 227-252, June.
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    Cited by:

    1. Goncalves, Judite & Martins, Pedro S., 2018. "The Effect of Self-Employment on Health: Evidence from Longitudinal Social Security Data," IZA Discussion Papers 11305, Institute for the Study of Labor (IZA).
    2. Pedro S. Martins, 2016. "Do wages increase when severance pay drops? Not in recessions," Working Papers 77, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.

    More about this item

    Keywords

    unemployment insurance; moral hazard; employment duration; big data;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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