Do Benefit Cuts Boost Job Findings? Swedish Evidence from the 1990s

By Kenneth Carling, B. Holmlund, Altin Vejsiu. Social Science Research Network, 2001

183 citations recorded by the source corpus.

In June 1995, the Swedish parliament decided to cut the replacement rate in unemployment insurance from 80 percent to 75 percent, a change that took effect on January 1, 1996. This paper examines how this change affected job finding rates among unemployed insured individuals. To identify the effect of the policy we exploit a quasi-experimental feature of the benefit cut: only a fraction of the unemployed was affected by the reduction in replacement rates. We compare the evolution of job finding rates before and after the reform among those affected and those not affected. Our estimates suggest that the reform caused an increase in the transition rate of roughly 10 percent. There is also evidence of anticipatory behavior among the unemployed; the effects of the reform seem to operate several months before its actual implementation in January 1996.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/01b98ba74c26284d4e81501f663071a5748780bc

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Citations in the corpus

Benefit Entitlement and Unemployment Duration: The Role of Policy Endogeneity (2004, background): “…and non-receivers of unemployment benefits (Carling et al., 1996 for Sweden and Bover et al., 1998 for Spain); or study major cuts in benefits (e.g. Carling et al., 2001 look at a major benefit cut in Sweden and Abbring et al., 1998; Van den Berg et al., forthcoming look at the impact of major…”
The Beveridge Curve, Unemployment, and Wages in the OECD from the 1960s to the 1990s (2001, background): “Micro evidence from policy changes is contained in Carling et al. (1999), Hunt (1995) and Harkman (1997), and from experiments in Meyer (1993).”
Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets (2018, unknown): “(Carling et al, 2001).11 Because of this, it is difficult to imagine that high risky market participation in Sweden compared to many other countries can be explained by the “generous” unemployment insurance system.”
The relative efficiency of labour market pro-grammes: Swedish experience from the 1990s (2004, background): “5 For a broader overview of the Swedish UI –system, see Carling et al. (2001).”
Improving Incentives in Unemployment Insurance: A Review of Recent Research (2006, unknown): “Carling et al. (2001) report unsuccessful attempts to find any significant interaction effect.”
How Changes in Financial Incentives Affect the Duration of Unemployment (2006, unknown): “Carling et al. (2001), studying the effects of a reduction in the RR from 80% to 75% in Sweden in 1995, find that this policy change increased the job finding rate by roughly 10%, implying an elasticity of around 1.7.”
An Evaluation of the Swedish System of Active Labor Market Programs in the 1990s (2004, background): “…some aspects of the overall functioning of the Swedish unemployment system, a system comprising both a collection of different programs 7 Over 90% of the unemployed do register at an employment office (from a validation study by Statistics Sweden, quoted in Carling et al., 1996, footnote 7).”
Nonlinear Policy Rules and the Identification and Estimation of Causal Effects in a Generalized Regression Kink Design (2012, background): “An exception is Carling et al. (2011), who study the effect of a reduction in the benefit replacement rate in Sweden in 1996 on the exit rate from unemployment recipiency to employment.”
Labor Market Effects of Unemployment Insurance Design (2014, unknown): “Carling et al. (2001) study the eﬀects of a cut in Swedish replacement rates in January 1996 from a maximum of 80% to 75%.”
Labor Supply Effects of Social Insurance (2002, unknown): “Carling et al. (2001) argue that UI will raise wage pressure in economies where wage bargaining is pervasive, thus reinforcing its adverse incentive effects on job search.”