Unemployment Insurance and Subsequent Job Duration: Job Matching vs. Unobserved Heterogeneity

By Christian Belzil. Social Science Research Network, 2001

110 citations recorded by the source corpus.

The relationship between unemployment benefit duration, unemployment duration and subsequent job duration is investigated using a multi-state duration model with state specific unobserved heterogeneity. I allow maximum benefit duration to be correlated with unemployment duration as well as accepted job duration. I examine two potential explanations for the relationship between unemployment and job spell durations; UI benefits increase job matching quality vs unobserved heterogeneity. I find that the escape rate out of unemployment seems to raise significantly within 5 weeks of benefit termination and new jobs accepted within this 5 week period seem to have a higher dissolution rate. At the same time, unobserved heterogeneity is also found to explain the correlation between unemployment and job duration. Various simulations indicate that increasing the maximum benefit duration by one week will raise expected unemployment duration by 1 to 1.5 days and expected job duration by 0.5 to 0.9 day.

Subfields: Economics and Econometrics, General Health Professions

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Citations in the corpus

Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability (2009, unknown): “5 Belzil (2001), studies the effect of UI benefits on the exit rate from unemployment and subsequent employment using an inflow sample of unemployed from administrative files of the Canadian unemployment insurance program.”
Welfare States and the Scar Effects of Unemployment: A Comparative Analysis of the United States and West Germany1 (2004, background): “Also, Belzil (2001) had not been able to obtain positive evidence of unemployment insurance on the stability of post-unemployment jobs.”
Benefit Duration, Unemployment Duration and Job Match Quality: A Regression-Discontinuity Approach (2009, background): “In a series of papers, Belzil (1992, 1995, 2001) analyzes unemployment experience and employment duration in the context of the Canadian UI reform finding that the incidence of voluntary unemployment is positively correlated with the duration of the preceding spell of unemployment and benefit…”
Labor Market Effects of Unemployment Insurance Design (2014, unknown): “The minimum beneﬁt duration varies between countries from around 3 months in Canada, Japan, Korea, Slovenia and Turkey, around 6 months in Estonia, Greece, Germany, Italy, Poland, 1 year in Norway and Sweden and 2 years in Portugal.”
Does reducing unemployment insurance generosity reduce job match quality (2008, background): “But Classen (1977), Blau and Robins (1986), Kiefer and Neumann (1989), and Addison and Blackburn (2000) find a weak or negligible effect on post-unemployment wages.”