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

Author

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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

    as
    1. 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.
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    3. 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.
    4. Schmidt, Peter & Witte, Ann Dryden, 1989. "Predicting criminal recidivism using 'split population' survival time models," Journal of Econometrics, Elsevier, vol. 40(1), pages 141-159, January.
    5. 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.
    6. Dale T. Mortensen, 1977. "Unemployment Insurance and Job Search Decisions," ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
    7. Carling, Kenneth & Edin, Per-Anders & Harkman, Anders & Holmlund, Bertil, 1996. "Unemployment duration, unemployment benefits, and labor market programs in Sweden," Journal of Public Economics, Elsevier, vol. 59(3), pages 313-334, March.
    8. 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.
    9. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-138, February.
    10. 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.
    11. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
    12. John T. Addison & Pedro Portugal, 2003. "Unemployment Duration Competing and Defective Risks," Journal of Human Resources, University of Wisconsin Press, vol. 38(1).
    13. 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.
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    Citations

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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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).
    5. Anabela Carneiro & Pedro Portugal & Jose Varejão, 2013. "Catastrophic Job Destruction," OECD Social, Employment and Migration Working Papers 152, OECD Publishing.
    6. 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].
    7. 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).
    8. 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.
    9. Martín-Román, Ángel L., 2020. "Beyond the added-worker and the discouraged-worker effects: the entitled-worker effect," MPRA Paper 103973, University Library of Munich, Germany.
    10. 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.
    11. 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.
    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. 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.
    14. 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," FEUNL Working Paper Series wp608, Universidade Nova de Lisboa, Faculdade de Economia.

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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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