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How Changes in Benefits Entitlement Affect Job-Finding: Lessons from the Slovenian "Experiment"

  • van Ours, Jan C.

    ()

    (Tilburg University)

  • Vodopivec, Milan

    ()

    (International School for Social and Business Studies, Celje, Slovenia)

In 1998 the Slovenian UI system was drastically reformed. The reform reduced the potential duration of unemployment benefits substantially and simultaneously improved employment services offered to, and monitoring of, the recipients. We find that the reduction in potential benefit duration had a positive effect on the exit rate out of unemployment – both to employment and to other destinations – at various durations of unemployment spells and for many categories of unemployed workers. We also identify a clear spike in the exit rate out of unemployment in the month unemployment benefits expire (and a smaller spike in the month thereafter), and for males an increase of job-finding rate in the third month of unemployment, a likely consequence of a reduction of the level of benefit that occurs at that point. Interestingly, post-unemployment wages of recipients were not affected after the change of the law, suggesting that higher job-finding rates following the reduction of benefits were not produced by reduced reservation wages (higher acceptance probability) but rather more effective job-search activity.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1181.

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Length: 48 pages
Date of creation: Jun 2004
Date of revision:
Publication status: published in: Journal of Labor Economics, 2006, 24 (2), 351-378
Handle: RePEc:iza:izadps:dp1181
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  1. Klasen, Stephan & Woolard, Ingrid, 2000. "Surviving Unemployment without State Support: Unemployment and Household Formation in South Africa," IZA Discussion Papers 237, Institute for the Study of Labor (IZA).
  2. John C. Ham & Samuel Rea, 1986. "Unemployment Insurance and Male Unemployment Duration in Canada," Working Papers 592, Princeton University, Department of Economics, Industrial Relations Section..
  3. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, March.
  4. Vodopivec, Milan & Worgotter, Andreas & Raju, Dhushyanth, 2003. "Unemployment benefit systems in Central and Eastern Europe : a review of the 1990s," Social Protection Discussion Papers 26307, The World Bank.
  5. Knut Roed & Tao Zhang, 2003. "Does Unemployment Compensation Affect Unemployment Duration?," Economic Journal, Royal Economic Society, vol. 113(484), pages 190-206, January.
  6. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
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