How Changes in Financial Incentives Affect the Duration of Unemployment

By Rafael Lalive, J. van Ours, Josef Zweimüller. Social Science Research Network, 2006

346 citations recorded by the source corpus.

This paper studies how changes in the two key parameters of unemployment insurance - the benefit replacement rate (RR) and the potential duration of benefits (PBD) - affect the duration of unemployment.In 1989, the Austrian government made unemployment insurance more generous by changing, simultaneously, the maximum duration of regular unemployment benefits and the earnings replacement ratio.We find that increasing the replacement ratio has much weaker disincentive effects than increasing the maximum duration of benefits.We use these results to split up the total costs to unemployment insurance funds into costs due to changes in the unemployment insurance system and costs due to behavioral responses of unemployed workers.Results indicate that costs due to behavioral responses are substantial.

Subfields: Economics and Econometrics, General Health Professions

View Paper: https://www.semanticscholar.org/paper/69b7b8acf2e29e5f54250476ea9108c76a94df5b

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In Economics and Econometrics

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Citations in the corpus

The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job? (2007, background): “In both gures, there is a sharp spike in the unemployment exit hazard in the week of bene t exhaustion (t = T ), and a relatively high unemployment exit rate in the weeks immediately after exhaustion (consistent with Lalive et al., 2006).”
How Do Extended Benefits Affect Unemployment Duration? A Regression Discontinuity Approach (2008, neutral): “See McCrary (2005) and Lee and McCrary (2005) for a discussion of manipulation in the regression discontinuity design.”
Imposing Minimax and Quantile Constraints on Optimal Matching in Observational Studies (2017, methodology): “Specifically, lalive contains data from [1] that is used in the examples.”
How Shortening the Potential Duration of Unemployment Benefits Affects the Duration of Unemployment: Evidence from a Natural Experiment (2006, background): “Roed and Zhang (2003) find end-of-benefit spikes for Norway, and Lalive and Zweimüller (2004) and Lalive et al. (2004) find them for Austria.”
Extended Unemployment Benefits and Early Retirement: Program Complementarity and Program Substitution (2016, background): “See Lalive et al. (2006) for a detailed description of the policy change and its impact on the unemployment duration of job losers.”
Too Old to Work, Too Young to Retire? (2017, background): “For a study that looks at the implications of this policy change on unemployment durations see Lalive et al. (2006).”
Labor Market Effects of Unemployment Insurance Design (2014, neutral): “The studies are characterized in terms of country, calendar time period, sample size, treated population, the identiﬁcation strategy and the eﬀect of UI on duration using two indicators for the dose-response eﬀects to enable a comparison between the studies.”