The Effects of UI Benefits on Unemployment and Subsequent Outcomes: Evidence from a Kinked Benefit Rule

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.     

Labour market flows: Facts from the United Kingdom

This paper documents a number of facts about worker gross flows in the United Kingdom for the period between 1993 and 2010. Using Labour Force Survey data, I examine the size and cyclicality of the flows and transition probabilities between employment, unemployment and inactivity, from several angles. I examine aggregate conditional transition probabilities, job-to-job flows, employment separations by reason, flows between inactivity and the labour force and flows by education. I decompose contributions of job-finding and job-separation rates to fluctuations in the unemployment rate. Over the past cycle, the job-separation rate has been as relevant as the job-finding rate.     

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.     

Endogenous labor force participation and firing costs

I construct a matching model to explain the labor market transition between employment, unemployment and nonparticipation, and evaluate the quantitative effects of firing costs. The model has several features that are distinguished from previous studies: endogenous labor force participation, different job-search decisions and imperfect insurance markets. I find that the model is able to account for the U.S. labor market, especially the gross labor-force transition rates. I also find that firing costs as a type of firing tax have a negative effect on the layoff rate, the job-finding probability and the participation rate. In particular, the effect of a decrease in the job-finding probability is greater than the effect of a decrease in the layoff rate, and this results in an increase in the unemployment-to-population ratio. Finally, firing costs make individuals' job tenures longer and skew the asset distribution to the right.     

UNEMPLOYMENT,HUMAN CAPITAL DEPRECIATION,AND UNEMPLOYMENT INSURANCE POLICY

This paper presents a structural estimation of a life cycle model with unemployment risk. The model allows for human capital depreciation during unemployment. It is estimated using German and US household‐level data. The data suggest that the adverse impact of unemployment on individual productivity is important in both countries, but quantitatively more relevant in Germany. Moreover, simulations show that the combination of skill depreciation with the generous unemployment insurance system that was in place in Germany until recently is a key factor in explaining the differences in labour market performance between these countries. Copyright © 2012 John Wiley & Sons, Ltd.     

Population,labour force and unemployment in Andalusia: prospects for 1993

"This paper is concerned with forecasting population, employment, labour force and unemployment in Andalusia [Spain] to 1993. For this purpose, a block-recursive demoeconomic model is presented. The demographic submodel is based on the component-cohort method of forecasting population by age and sex. The economic submodel uses econometric and time series analysis to forecast employment both in the medium and short-term. In the labour market part, the labour force is forecasted taking into account the encouraged-discouraged worker effects of changes in the demand for labour."     

Decomposing the Ins and Outs of Cyclical Unemployment

This paper analyses the contribution of the composition of the pool of employed and unemployed individuals to labour market dynamics in different phases of the business cycle. Using individual‐level data from the Current Population Survey (CPS), we decompose differences in employment status transition rates between upswings and downturns into explained and unexplained parts. We find that the duration of unemployment contributes to explaining unemployment outflows to employment and observe that its initially positive contribution turns negative in deep recessions. Composition effects play an important role for unemployment outflows to non‐participation but dampen the cyclicality of unemployment inflows from employment.     

State dependence in youth labor market experiences, and the evaluation of policy interventions

We investigate the extent and type of state dependence in labor market outcomes for young low-skilled Australians. Our model allows for three labor force states, employment, unemployment and out of the labor force, and for observed and unobserved heterogeneity. We find evidence of occurrence dependence, but no lagged duration dependence. A past employment spell increases the probability of employment in the future, but the length of the spell does not matter. A past spell of unemployment undoes the positive benefits from a spell in employment. Interpretations of these effects and implications for labor market policies are discussed.     

Regional unemployment in Spain: Disparities,business cycle and wage setting

The existence and persistence of regional disparities in the unemployment rate is a common problem of many European economies. However, in Spain, this situation exhibits a characteristic feature: a strong positive relationship with the business cycle. The analysis in this paper investigates the relationship between this distinguishing feature of the Spanish economy and changes in the regional wage-setting mechanism, and how this relationship has influenced the aggregate Spanish labour market performance in the recent past. The empirical finding of an important regional imitation effect in wage bargaining may explain both the persistence of disparities, and the positive relationship between regional unemployment dispersion and the business cycle. This result has a direct implication for employment policies, which must take into account the regional dimension of the unemployment problem.     

Exits from unemployment: Recall or new job

This paper studies transitions out of unemployment in Spain distinguishing between recall to the same employer and reemployment in a new job. We use a large sample of newly unemployed workers obtained from Social Security records for Spain. These data contain information about each individual's employer identity before and after the unemployment spell. A discrete-time duration model with competing risks of exits serves us to investigate the factors that influence the probabilities of leaving unemployment to return to the same employer or to find a new job with a different employer. We find that taking into account the route to exit unemployment helps us to understand the influence of individual and job characteristics on the hazard rate. Moreover, the recall hazard rate exhibits no duration dependence, whereas the new-job hazard rate presents positive duration dependence.     

The impact of minimum wages on wages,work and poverty in Nicaragua

In this paper we use an individual- and household-level panel data set to study the impact of changes in legal minimum wages on a host of labor market outcomes including: a) wages and employment, b) transitions of workers across jobs (in the covered and uncovered sectors) and employment status (unemployment and out of the labor force), and c) transitions into and out of poverty. We find that changes in the legal minimum wage affect only those workers whose initial wage (before the change in minimum wages) is close to the minimum. For example, increases in the legal minimum wage lead to significant increases in the wages and decreases in employment of private covered sector workers who have wages within 20% of the minimum wage before the change, but have no significant impact on wages in other parts of the distribution. The estimates from the employment transition equations suggest that the decrease in covered private sector employment is due to a combination of layoffs and reductions in hiring. Most workers who lose their jobs in the covered private sector as a result of higher legal minimum wages leave the labor force or go into unpaid family work; a smaller proportion find work in the public sector. We find no evidence that these workers become unemployed.Our analysis of the relationship between the minimum wage and household income finds: a) increases in legal minimum wages increase the probability that a poor worker's family will move out of poverty, and b) increases in legal minimum wages are more likely to reduce the incidence of poverty and improve the transition from poor to non-poor if they impact the head of the household rather than the non-head; this is because the head of the household is less likely than a non-head to lose his/her covered sector employment due to a minimum wage increase and because those heads that do lose covered sector employment are more likely to go to another paying job than are non-heads (who are more likely to go into unpaid family work or leave the labor force).     

The Effects of Immigration on Household Services,Labour Supply and Fertility

Fertility and female labour force participation are no longer negatively correlated in developed countries. At the same time, increased immigration affects supply and prices of household services, which are relevant to fertility and employment decisions. This paper analyses the effect of immigration on labour supply and fertility of native women in the UK. Adopting an instrumental variable approach, I find that immigration increases female labour supply without affecting fertility. My results show that immigration increases the size of the childcare sector, and reduces its prices, suggesting that immigrants may ease the trade‐off between working and child rearing among native women.     

Government Employment and Wages and Labour Market Performance

Government wage, benefit, and employment decisions are not taken on a profit-maximizing basis, and have a substantial impact on aggregate labour market performance and unemployment. In a two-sector labour market model with free mobility of labour, an increase in government wages or benefits reduces private sector employment, and government employment is not an effective counter-cyclical instrument. Empirical tests for Greece confirm that the expansion of the public sector in the 1980s contributed to the deterioration of labour market performance.     

The Relationship between Unemployment Benefits and Re‐employment Probabilities: Evidence from Spain*

We provide the first Spanish evidence about the effects on re‐employment probabilities of variations in benefit levels and time‐to‐exhaustion. Increases in unemployment insurance (UI) benefit levels had a small disincentive effect on the re‐employment hazard on average. Around this average, there were larger disincentive effects for men with elapsed durations between 4 and 18 months, whereas for men unemployed longer than 18 months, or for men resident in the south, the effect was negligible. Re‐employment hazards increased when UI exhaustion was imminent, but the change was small. Extensions to unemployment assistance eligibility in 1989 for men aged 45+ years lowered re‐employment probabilities.     

Distortionary Taxation and Labour Market Performance

Quarterly estimates of consumption, capital and labour tax rates are provided for six major OECD countries. We then use the 'stylized facts' methodology to evaluate the strength, sign and phase of cyclical comovements between tax rates and labour market variables. Labour taxes distort labour market de-cisions and help explain why the unemployment rate is so high in continental Europe. However, labour taxes cannot be the only determinant of diverging unemployment rates since the labour force is also reduced by higher taxes. Finally, we offer some preliminary structural evidence showing employment growth in particular to be negatively related to the taxation of labour.     

How do the employment effects of job creation schemes differ with respect to the foregoing unemployment duration?

Based on new administrative data for Germany covering entrances into job creation schemes between July 2000 and May 2001, we evaluate the effects of this active labour market policy programme considering the timing of treatment in the individual unemployment spell. Applying propensity score matching in a dynamic setting where the time until treatment in the unemployment spell is stratified into quarters, regional (East and West Germany) as well as gender differences are considered in the estimation. The results in terms of employment present a heterogeneous, but disappointing picture. For West Germany, most of the estimates are insignificant at the end of the observation period, and only one positive exception could be established. In East Germany, none of the groups experiences an improvement of the labour market situation, but the employment chances tend to be reduced due to participation even 30 months after start of programmes.     

Desired and actual labour supply of unmarried men and women in the Netherlands

Desired and actual working hours of unmarried adults are analyzed. A discrete structural neoclassical model is used to explain desired hours, which depend on gross wage rates, tax and benefit rules, other income, and some background variables. The model takes account of fixed costs of working and of prediction errors in wage rates of nonworkers. Actual hours are explained from desired hours and hours restrictions. Deviations between actual and desired hours are used to identify equations for involuntary unemployment and the lack of part-time jobs. The model is estimated using cross-section data from the Dutch Socio-Economic Panel. We find larger wage elasticities of desired hours of work for women than for men. Involuntary unemployment and a lack of part-time jobs appear to be important sources of hours restrictions. Individuals with (potential) wages below the minimum wage have a significantly larger probability of involuntary unemployment than others.     

The measurement of unemployment when unemployment is high

Are jobless persons who want work but are not actively searching, unemployed or out of the labour force? Previous research on this issue has focused on North America and used as the test whether the probability of transition to employment is similar for searching and non-searching jobless persons. This paper develops three new tests as to whether those not searching but wanting work are distinct from the searching unemployed. It asks: are non-searching persons richer, happier, and do they have a lesser impact on local wages, than the searchers? These tests are implemented using data from South Africa, a country in which unemployment is very high and where the treatment of non-searchers really matters for the understanding of poverty and labour market issues. The results favour the ‘discouraged worker’ view of the non-searching unemployed and the use of the broad, inclusive, measure of unemployment.     

Forecasting Macroeconomic Labour Market Flows: What Can We Learn from Micro‐level Analysis?

Forecasting labour market flows is important for budgeting and decision‐making in government departments and public administration. Macroeconomic forecasts are normally obtained from time series data. In this article, we follow another approach that uses individual‐level statistical analysis to predict the number of exits out of unemployment insurance claims. We present a comparative study of econometric, actuarial and statistical methodologies that base on different data structures. The results with records of the German unemployment insurance suggest that prediction based on individual‐level statistical duration analysis constitutes an interesting alternative to aggregate data‐based forecasting. In particular, forecasts of up to six months ahead are surprisingly precise and are found to be more precise than considered time series forecasts.