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Unintended Health Consequences of Decreasing Unemployment Insurance Generosity During an Economic Recession

Author

Listed:
  • Manuel Flores

    (Serra Hunter Fellow, Department of Applied Economics, Universitat Autònoma de Barcelona, 08193 Bellaterra, Barcelona, Spain.)

  • Fernando G. Benavides

    (Centre d’Investigació en Salut Laboral, Universitat Pompeu Fabra & CIBER of Epidemiology and Public Health)

  • Laura Serra-Saurina

    (CIBER of Epidemiology and Public Health & Research Group on Statistics, Econometrics and Health (GRECS), University of Girona.)

Abstract

We exploit an unexpected labor market reform to estimate the effects of a significant decrease in unemployment insurance (UI) generosity during an economic recession. On July 13, 2012, the Spanish Government reduced the replacement rate from 60% to 50% after 180 days of UI benefit receipt for all spells beginning after July 14, 2012. Using rich linked administrative data and a difference-in-differences approach, we show that the decrease in UI generosity resulted in higher sickness absence rates, thereby reducing the previously documented government savings from this reform. Our findings suggest that both financial stress and moral hazard are possible mechanisms.

Suggested Citation

  • Manuel Flores & Fernando G. Benavides & Laura Serra-Saurina, 2024. "Unintended Health Consequences of Decreasing Unemployment Insurance Generosity During an Economic Recession," Working Papers wpdea2403, Department of Applied Economics at Universitat Autonoma of Barcelona.
    • Handle: RePEc:uab:wprdea:wpdea2403
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