Unemployment Insurance Eligibility and Employment Duration

While extensive research on unemployment insurance (UI) has examined how benefits affect workers’ job search, little is known about how eligibility conditions shape firms’ hiring decisions. These conditions, often requiring a minimum work history, affect the value workers place on contracts meeting the eligibility threshold. Exploiting a French reform that modified these requirements after 2009, we show that firms internalize workers’ preferences and adjust contract durations to align with the new threshold. This reveals an overlooked ex-ante mechanism, where firms respond to UI incentives when posting vacancies—before meeting workers—rather than only through ex post adjustments. This response shifts contract duration distributions, also affecting workers already eligible for UI. Our findings have two implications: first, UI shapes firms’ behavior at the vacancy stage, influencing job creation decisions ex ante, not just separation decisions ex post; second, UI eligibility conditions generate significant spillover effects.