The effect of monitoring unemployment insurance recipients on unemployment duration: Evidence from a field experiment

Programme administration is a relatively neglected issue in the analysis of disincentive effects of unemployment benefit systems. We investigate this issue with a field experiment in Hungary involving random assignment of benefit claimants to treatment and control groups. Treatment increases the monitoring of claims — claimants make more frequent visits to the employment office and face questioning about their search behaviour. Treatment has quite a large effect on durations on benefit of women aged 30 and over, while we find no effect for younger women or men.     

Unemployment insurance and the distribution of unemployment spells

In this paper administrative data from the unemployment-insurance (UI) system are used to examine the distribution of unemployment spells. Hazard plots of the data reveal a strong clustering around the benefit exhaustion point. In addition, estimation of the effects of the exhaustion point and of the UI benefit level on spell lengths obtained with a non-parametric proportional-hazards model - estimated by direct maximization of the general likelihood function - shows significant effects of both. However, the effect of the exhaustion point on the hazard is not proportional, making detection of its effect somewhat difficult.     

Wage Formation,Regional Migration and Local Labour Market Tightness*

Empirical studies of regional wage formation and interregional migration routinely include the regional unemployment rate as indicator of local labour market tightness. However, these studies are usually motivated by economic theories that emphasize transition probabilities between unemployment and employment, and the unemployment rate is an imperfect proxy for these probabilities. We use a large micro data set to compute estimates of the rate of outflow from unemployment for 90 Norwegian travel‐to‐work areas. The outflow rates perform better than traditional measures of regional labour market tightness in panel data analyses of regional wages and interregional migration.     

Benefit shifting: The case of sickness insurance for the unemployed

This study describes the probability of transition from unemployment with unemployment insurance (UI) to sickness insurance (SI), using a proportional hazard duration model and a large register-based dataset. The combination of limited UI duration and the fact that SI rights do not depend on remaining UI, creates an incentive to use SI to effectively extend UI. The separate effects of elapsed unemployment duration and of UI duration on hazard rates are identified through a reform of the UI system. The estimated hazard rate for transition from unemployment to SI increases sharply the last months before UI exhaustion. The spikes are larger for diagnosis for mental illness, and vary across individuals, but are present for all groups and all diagnoses.     

On the extent of re-entitlement effects in unemployment compensation

We analyze the implications of two-tier unemployment compensation systems with non-automatic eligibility in an equilibrium matching model with Nash bargaining. As eligibility for UI does not automatically follow from employment, the two types of unemployed workers have different threat points, which delivers equilibrium wage dispersion. The parameters of the model are estimated for France, and the model is also calibrated for Denmark and the U.S. Re-entitlement effects are shown to be sizeable for all three countries. For France, re-entitlement effects lower by 15% the rise in the wage and by 25% the rise in unemployment following a 10% increase in the benefit level. Finally, we show that in all three countries the optimal compensation system is characterized by time-decreasing unemployment benefits and non-automatic eligibility for UI, with higher levels of both UI and UA benefits, a smaller decrease in benefits over time, and a longer employment duration required for UI eligibility than in the current system.     

Do Labour Market Programmes Speed up the Return to Work?*

We evaluate the impact of labour market programmes on unemployment durations in Norway, by means of a distribution‐free mixed proportional competing risks hazard rate model. We find that programme participation, once completed, improves employment prospects, but that there is often an opportunity cost in the form of a lock‐in effect during participation. The average net effect of programme participation on the length of the job search period is found to be around zero. For participants with poor employment prospects, the favourable post‐programme effects outweigh the negative lock‐in effects.     

DURATION OF UNEMPLOYMENT IN SPAIN: RELATIVE EFFECTS OF UNEMPLOYMENT BENEFIT AND FAMILY CHARACTERISTICS

ABSTRACT We estimate the effects of unemployment benefit and family situation on the unemployment duration in Spain. Empirical results indicate that the distinctions between the exits into employment and the exits from the labour force and between men and women are important. Although unemployment benefit reduces significantly the job-finding probabilities, its effects are much larger on exits from the labour force. Many people who decide to go out of the labour force delay their exits until they exhaust their unemployment benefits. Family situation also has strong effects on the duration of unemployment in Spain. Household heads have about twice larger job-finding probability than non-heads, and having a working household head or other working household members improves employment probability. This suggests that family connections in the labour market are important determinants of unemployment duration in Spain.     

Unemployment Experiences of Young Men: on the Road to Stable Employment?*

This study examines the unemployment experiences of young men in the United Kingdom over the period 1982.IV–1998.I. The empirical results show that repeated unemployment is a dominant feature of the UK labour market and that individual heterogeneity affects mainly the incidence of unemployment and only to a much lesser extent the duration of unemployment. We estimate that about 73% of the young unemployed find stable employment before the age of 35. The remaining 27%, concentrated among the lower‐skilled, keep returning into unemployment, suggesting structural employment instability. These findings imply that a labour market programme targeted at increasing the employability of the young unemployed would yield long‐term benefits by not only getting them out of unemployment but also keeping them out of unemployment.     

New Insights into Unemployment Duration and Post Unemployment Earnings in Germany*

Building on non‐stationary search theory ( Mortensen, 1977 ; Van den Berg, 1990 ), this article estimates the effects of UB on unemployment durations and future earnings using unique administrative data in Germany. We apply censored Box–Cox quantile regression. Our results imply that the length of entitlement shows only a weak effect on unemployment duration for entitlement lengths up to 12 months and no effect on post unemployment earnings. There are noticeable effects on exits from unemployment for entitlement lengths above 12 months. A high wage replacement rate for low‐wage earners is associated with a longer duration of unemployment and higher post unemployment earnings.     

The Rise in Danish Unemployment: Reallocation or Mismatch?*

The two main competing theories for the outward shift in the uv‐curve are investigated: increased separations from employment at a given employment level (reallocation) and decreased levels of hires, given unemployment and vacancies (mismatch). Shifts in the unemployment–vacancy (uv)‐curve and the hiring function are modelled by smooth transition functions, and the hypothesis of analogous shifts in the two curves is tested and accepted. This is interpreted as evidence in favour of the mismatch hypotheses.     

Optimal unemployment policy in a matching equilibrium

This paper considers optimal unemployment policy in a matching equilibrium with risk averse workers and unobserved job search effort. The Planner chooses unemployment benefits, taxes and job creation subsidies to maximise a Utilitarian welfare function. Optimal policy involves a trade-off between higher employment taxes (which finance more generous unemployment benefits) and greater market tightness (which reduces the average unemployment spell). Optimal UI implies the initial UI payment equals the wage, thus ensuring consumption is smooth across the job destruction shock, and UI payments then fall with duration.     

Unemployment insurance and subsequent job duration: job matching versus unobserved heterogeneity

The relationship between Unemployment Insurance (UI) benefit duration, unemployment duration and subsequent job duration is investigated using a multi‐state duration model with state specific unobserved heterogeneity. I examine two potential explanations for the negative correlation between unemployment and job spell durations; UI benefits increase job matching quality (the ‘Matching’ effect) versus unobserved heterogeneity (‘Adverse Selection’). The Matching effect is found to be weak. Although new jobs accepted within 5 weeks of benefit termination seem to have a higher dissolution rate, the negative correlation between unemployment and job duration is mostly explained by unobserved heterogeneity. Various simulations indicate that increasing the maximum benefit duration by one week will raise expected unemployment duration by 1.0 to 1.5 days but will raise expected job duration by 0.5 to 0.8 day only. Copyright © 2001 John Wiley & Sons, Ltd.     

HOW EFFECTIVE ARE UNEMPLOYMENT BENEFIT SANCTIONS? LOOKING BEYOND UNEMPLOYMENT EXIT

This paper provides a comprehensive evaluation of the effects of benefit sanctions on post‐unemployment outcomes such as post‐unemployment employment stability and earnings. We use rich register data which allow us to distinguish between a warning that a benefit reduction may take place in the near future and the actual withdrawal of unemployment benefits. Adopting a multivariate mixed proportional hazard approach to address selectivity, we find that warnings do not affect subsequent employment stability but do reduce post‐unemployment earnings. Actual benefit reductions lower the quality of post‐unemployment jobs both in terms of job duration as well as in terms of earnings. Copyright © 2012 John Wiley & Sons, Ltd.     

The Low‐Pay No‐Pay Cycle: Are There Systematic Differences across Demographic Groups?

We investigate transitions between unemployment, low‐paid employment and higher‐paid employment using dynamic panel data methods applied to household panel data. We find state dependence in both unemployment and low‐paid employment and evidence of a low‐pay no‐pay cycle. However, we also find significant differences in effects across population subgroups. Typically, the young and better‐educated face lower penalties from unemployment and low‐paid employment. Further, low‐paid employment is preferable to unemployment for women regardless of their demographic characteristics, but for men who have only completed secondary schooling, low‐paid employment actually decreases the chances of entering higher‐paid employment by more than does unemployment.     

Unions and the economic basis of attitudes

Unions make differences to employee satisfaction that correspond to their effects on individual economic advantage. Panel data reveal how changes in economic circumstance and changes in job satisfaction are linked to changes in union coverage. When individuals move into a union covered job they receive a wage mark‐up and express enhanced pay satisfaction. Conversely, those moving from a union covered job on average lose any mark‐up and have significantly reduced satisfaction. Similar findings emerge for working hours. On average individuals prefer shorter hours, something they tend (not) to achieve on moving (out of) into a unionised job, resulting in higher (lower) satisfaction. Switching into union coverage lowers satisfaction with job security, even though coverage has no effect on the risk of unemployment. This is because covered employees suffer greater costs of re‐employment for a given level of unemployment risk, partly because of loss of the union mark‐up.     

The effect of unemployment benefits on re-employment rates: Evidence from the Finnish unemployment insurance reform

In January 2003, the unemployment benefits in Finland were increased for workers with long employment histories. The average benefit increase was 15% for the first 150 days of the unemployment spell. At the same time severance pay system was abolished. In this paper we evaluate the effect of the change in the benefit structure on the duration of unemployment by comparing the changes in the re-employment hazard profiles among the unemployed who were affected by the reform to the changes in a comparison group whose benefit structure remained unchanged. We find that the change in the benefit structure reduced the re-employment hazards by on average 17%. The effect is largest at the beginning of the unemployment spell and disappears after the eligibility period for the increased benefits expires.     

Unemployment compensation under partial program coverage

More than half of the unemployed in the U.S. are not covered by unemployment insurance. For them the provision of employment-dependent UI creates an additional benefit from work: future UI eligibility. This paper explores the overall and distributional effects of providing unemployment compensation under partial coverage. I extend a standard search model to accommodate eligible and non-eligible workers, where eligibility status is determined by previous separation history. While the effect of unemployment benefits on unemployment duration and post unemployment wages is theoretically ambiguous, a calibration of the model to the U.S. economy shows that unemployment benefits raise the unemployment rate. In addition I show that wage gaps and unemployment duration differentials between the eligible and non-eligible exist and are larger when layoffs are high.     

Employment,Inequality and the UK National Minimum Wage over the Medium‐Term*

We assess the impact of the national minimum wage (NMW) on employment and inequality in the UK over the decade since its introduction. We evaluate its effects in each year, using an incremental differences‐in‐differences (IDiD) estimator. Identification is based on variation in the bite of the NMW across local labour markets and the different sized year on year up‐ratings. We find that an increased bite of the NMW is associated with falls in lower tail wage inequality. While the average employment effect over the entire period is broadly neutral, there are small but significant positive NMW effects from 2003 onwards.     

Were the Hartz Reforms Responsible for the Improved Performance of the German Labour Market?

From 2005 to 2011 employment rose and unemployment rates declined considerably in Germany. This favourable development followed the labour market reforms initiated in 2003, and there has been a tendency to attribute the improved labour market performance to those reforms. Causal micro‐evaluations of the various measures, however, show hardly any effects on variables that can be related to employment. Rather, it seems that employment increased in response to a process of wage moderation that had already begun in the 1990s. It is possible that this moderation was itself partially a product of the reforms, but this needs further investigation.     

Examining policy configurations as conditions for long-term unemployment and non-standard employment in OECD countries using fuzzy-set analysis

This paper investigates how particular configurations of institutional conditions cause high rate of long-term unemployment and non-standard employment rate for 18 OECD countries during the period of 2001–2008. The paper aims to investigate how employment protection legislation (EPL), unemployment benefit and statutory minimum wages are associated with long-term unemployment and non-standard employment. Using the fuzzy-set analysis, the paper examines how the combination of policies matters in causing long-term unemployment and/or non-standard employment. The result suggests that a low level of statutory minimum wage can lead to high levels of non-standard employment in combination with either strict EPL for permanent workers or weak EPLs for temporary workers. The long-term unemployment rate is suggested to be high when there is strict EPL for temporary workers in combination with high levels of statutory minimum wage. This paper highlights the importance of examining multiple policies as configuration.