The Effects of UI Benefits on Unemployment and Subsequent Outcomes: Evidence from a Kinked Benefit Rule |
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Authors: | Tomi Kyyrä Hanna Pesola |
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Institution: | VATT Institute for Economic Research, Helsinki, 001101 Finland |
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Abstract: | This paper analyses the effects of unemployment insurance benefits on unemployment exits and subsequent labour market outcomes. We exploit a piecewise linear relationship between the previous wage and benefits in Finland to identify the causal effects of the benefit level by using a regression kink design. Although we only find weak evidence of an effect on the time to the next job, higher benefits decrease the time spent in part-time unemployment and thus result in more full-time unemployment. The re-employment probability and post-unemployment wage are also negatively affected. The results for the duration of the first post-unemployment job are not conclusive, but in total both employment and earnings in the two years following the beginning of the unemployment spell decrease with higher benefits. |
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