DP4962 How Changes in Benefits Entitlement Affect the Duration of Unemployment

Author(s): Jan C. van Ours, Milan Vodopivec
Publication Date: March 2005
Keyword(s): job finding rates, potential benefit duration, unemployment insurance
JEL(s): C41, H55, J64, J65
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4962

This paper investigates the disincentive effects of the potential duration of unemployment insurance (UI) benefits. The disincentive effects are identified by exploiting changes in the UI system in Slovenia, which involved substantial reductions in the potential benefit duration and had characteristics of a ‘natural experiment’. We find that the change had a positive effect on the exit rate out of unemployment – both to employment and to other destinations – at various durations of unemployment spells and for many categories of unemployed workers.