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How Do Different Entitlements to Unemployment Benefits Affect the Transitions from Unemployment into Employment?

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  • Pedro Portugal
  • John T. Addison

Abstract

In Portugal duration of benefits is exclusively age determined while replacement rates are to all intents and purposes uniform. We exploit differences in potential maximum duration of benefits for nearly matched pairs of individuals who differ in age by one year and in potential maximum duration of benefits by three months. In specifications that take account of unobserved individual heterogeneity, while controlling for pure age effects on escape rates, we find that lower maximum benefit duration is associated with substantially higher quarterly rates of job finding in the range 53 to 106 per cent.

Suggested Citation

  • Pedro Portugal & John T. Addison, 2007. "How Do Different Entitlements to Unemployment Benefits Affect the Transitions from Unemployment into Employment?," Working Papers w200711, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w200711
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    References listed on IDEAS

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    1. Dale T. Mortensen, 1977. "Unemployment Insurance and Job Search Decisions," ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
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    7. Rafael Lalive & Jan Van Ours & Josef Zweimuller, 2006. "How Changes in Financial Incentives Affect the Duration of Unemployment," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 1009-1038.
    8. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
    9. Pedro Portugal & John T. Addison, 2008. "Six Ways To Leave Unemployment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(4), pages 393-419, September.
    10. David Card & Raj Chetty & Andrea Weber, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," American Economic Review, American Economic Association, vol. 97(2), pages 113-118, May.
    11. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    12. 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.
    13. 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.
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    Cited by:

    1. Martins, Pedro S., 2021. "Working to get fired? Unemployment benefits and employment duration," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 1016-1030.
    2. 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 of Labor Economics (IZA).
    3. Nagler, Paula, 2015. "The impact of unemployment insurance savings accounts on subsequent employment quality," MERIT Working Papers 2015-026, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Dlugosz, Stephan & Stephan, Gesine & Wilke, Ralf A., 2009. "Fixing the leak: Unemployment incidence before and after the 2006 reform of unemployment benefits in Germany," IAB-Discussion Paper 200925, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Marta Silva & José Garcia-Louzão, 2021. "Coworker Networks and the Labor Market Outcomes of Displaced Workers: Evidence from Portugal," Working Papers w202121, Banco de Portugal, Economics and Research Department.
    6. Álvaro A. Novo & André C. Silva, 2017. "Can a search model predict the effects of an increase in the benefit duration? Evidence from the Portuguese unemployment insurance reform," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-14, December.
    7. Martín-Román, Ángel L., 2022. "Beyond the added-worker and the discouraged-worker effects: the entitled-worker effect," Economic Modelling, Elsevier, vol. 110(C).
    8. Pedro Portugal & Anabela Carneiro & José Varejão, 2013. "Catastrophic Job Destruction," Working Papers w201314, Banco de Portugal, Economics and Research Department.
    9. Mário Centeno & Álvaro A. Novo, 2014. "Do Low-Wage Workers React Less to Longer Unemployment Benefits? Quasi-Experimental Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(2), pages 185-207, April.
    10. 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.
    11. Marta C. Lopes, 2016. "Using the variation in potential duration of unemployment benefits to estimate the causal effect of unemployment duration on re-employment wages," Nova SBE Working Paper Series wp608, Universidade Nova de Lisboa, Nova School of Business and Economics.
    12. Le Barbanchon, Thomas, 2016. "The effect of the potential duration of unemployment benefits on unemployment exits to work and match quality in France," Labour Economics, Elsevier, vol. 42(C), pages 16-29.
    13. Ignacio Moral-Arce & Javier Martín-Román & Ángel L. Martín-Román, 2019. "Cessation of Activity Benefit for Spanish Self-employed Workers: A Heterogeneous Impact Evaluation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 231(4), pages 41-79, December.
    14. Carneiro, Anabela & Portugal, Pedro & Varejão, José, 2014. "Catastrophic job Destruction during the Portuguese Economic Crisis," Journal of Macroeconomics, Elsevier, vol. 39(PB), pages 444-457.
    15. Pedro S. Martins, 2015. "Working to get fired? Regression discontinuity effects of unemployment benefit eligibility on prior employment duration," Working Papers 61, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    16. Marco Caliendo & Konstantinos Tatsiramos & Arne Uhlendorff, 2013. "Benefit Duration, Unemployment Duration And Job Match Quality: A Regression‐Discontinuity Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 604-627, June.

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    More about this item

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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