Accelerating the transition to employment at benefit exhaustion: still possible after four years of unemployment?

This paper provides evidence of how the long-term unemployed react to the threat of running out of unemployment insurance (UI) after receiving it for nearly 4 years. To identify the effect of UI exhaustion, we make use of a 1999 Danish legislative change that progressively reduced potential benefit duration from 5 to 4 years. We find that shortening UI duration hastens the transition to employment throughout the unemployment spell up to benefit exhaustion even if it occurs as long as 4 years later. However, although the proportional effect is large, it is small in absolute value.