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Do Unemployment Benefits Promote or Hinder Structural Change?


  • Boeri, Tito

    () (Bocconi University)

  • Macis, Mario

    () (Johns Hopkins University)


According to recent and largely untested theories, unemployment benefits (UBs) could improve the extent and quality of job reallocation even at the cost of increasing unemployment. Using yearly panel data from a large number of countries, we evaluate empirically the relationship between unemployment benefits and structural change. Unlike previous work assessing the effects of UBs on labor market stocks, we focus on flows and rely on policy "experiments", notably the introduction from scratch of unemployment benefits in many countries. We exploit the longitudinal nature of our data to lessen the potentially important selection, endogeneity and omitted variables problems. We find a positive, sizable and significant effect of the introduction of UBs on job reallocation, arising mainly from the job destruction margin although this effect fades away over time. UBs are also found to induce more sectoral shifts from agriculture to services. These findings appear to be robust to changes in the countries in the sample, control variables or estimation methods. We discuss to which extent our results are consistent with equilibrium matching models with or without endogenous sorting of workers into jobs providing entitlement to UBs and stochastic job matching.

Suggested Citation

  • Boeri, Tito & Macis, Mario, 2008. "Do Unemployment Benefits Promote or Hinder Structural Change?," IZA Discussion Papers 3371, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3371

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    Cited by:

    1. Jorgensen, Henning, 2009. "Flexible labour markets, workers' protection and the security of the wings": a Danish flexicurity solution to the unemployment and social problems in globalized economies"," Macroeconomía del Desarrollo 76, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    2. Boeri, Tito, 2012. "Setting the minimum wage," Labour Economics, Elsevier, vol. 19(3), pages 281-290.
    3. Kjell Erik Lommerud & Odd Rune Straume, 2012. "Employment Protection Versus Flexicurity: On Technology Adoption in Unionised Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 177-199, March.
    4. Michael Knogler, 2010. "Demographischer Wandel, Arbeitsmarktpartizipation und Sozialsysteme in den neuen EU-Mitgliedsländern : Absicherung bei Nicht-Beschäftigung," Memoranda - Policy Papers 49, Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).

    More about this item


    matching models; unemployment benefits; job reallocation;

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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