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The effects of UI benefits on unemployment and subsequent outcomes: Evidence from a kinked benefit rule

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  • Kyyrä, Tomi
  • Pesola, Hanna
Abstract
This paper analyzes the effects of unemployment insurance (UI) benefits on unemployment exits and subsequent labor market outcomes. We exploit a piecewise linear relationship between the previous wage and UI benefits in Finland to identify the causal effects of the benefit level by using a regression kink design. According to our findings, higher benefits lengthen nonemployment spells and decrease time spent in part-time unemployment, and thus result in more full-time unemployment. Also the re-employment probability and postunemployment wage are 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.

Suggested Citation

  • Kyyrä, Tomi & Pesola, Hanna, 2016. "The effects of UI benefits on unemployment and subsequent outcomes: Evidence from a kinked benefit rule," Working Papers 82, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:82
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    Cited by:

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    3. Ive Marx; & Henri Haapanala; & Sarah Marchal;, 2024. "Well-BOA: Is poverty reduction in Europe doomed? Conjectures, facts and a cautiously optimistic conclusion," Working Papers 2403, Herman Deleeck Centre for Social Policy, University of Antwerp.
    4. Marx, Ive & Haapanala, Henri & Marchal, Sarah, 2024. "Is Poverty Reduction in Europe Doomed? Conjectures, Facts and a Cautiously Optimistic Conclusion," IZA Discussion Papers 16967, Institute of Labor Economics (IZA).
    5. Mauri Kotamäki & Jukka Mattila & Jussi Tervola, 2018. "Distributional Impacts of Behavioral Effects – Ex-Ante Evaluation of the 2017 Unemployment Insurance Reform in Finland," International Journal of Microsimulation, International Microsimulation Association, vol. 11(2), pages 146-168.
    6. Ayertey, Winfred & Sharifi, Ayyoob & Yoshida, Yuichiro, 2024. "The impact of increase in block pricing on electricity demand responsiveness: Evidence from Ghana," Energy, Elsevier, vol. 288(C).

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    More about this item

    Keywords

    unemployment; unemployment benefit; unemployment duration; unemployment insurance; Social security; taxation and inequality; Labour markets and education;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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