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Timed to Say Goodbye: Does Unemployment Benefit Eligibility Affect Worker Layoffs?

Author

Listed:
  • Albanese, Andrea
  • Ghirelli, Corinna
  • Picchio, Matteo

Abstract

We study how unemployment benefit eligibility affects the layoff exit rate by exploiting quasi-experimental variation in eligibility rules in Italy. By using a difference-indifferences estimator, we find an instantaneous increase of about 12% in the layoff probability when unemployment benefit eligibility is attained, which persists for about 16 weeks. These findings are robust to different identifying assumptions and are mostly driven by jobs started after the onset of the Great Recession, in the South and for small firms. We argue that the moral hazard from the employer’s side is the main force driving these layoffs.

Suggested Citation

  • Albanese, Andrea & Ghirelli, Corinna & Picchio, Matteo, 2019. "Timed to Say Goodbye: Does Unemployment Benefit Eligibility Affect Worker Layoffs?," GLO Discussion Paper Series 323, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:323
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    Keywords

    Unemployment insurance; layoffs; employer–employee moral hazard; difference-in-differences; heterogeneous effects;

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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