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Working to get fired? Unemployment benefits and employment duration

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  • Martins, Pedro S.
Abstract
In many countries, jobseekers are entitled to unemployment benefits (UBs) only if they have previously worked a minimum period of time. This institutional feature creates a sharp change in the disutility from unemployment at UB eligibility and may distort the duration of jobs. In this paper, we evaluate this eligibility effect using a regression discontinuity approach. Our evidence is based on longitudinal social security data from Portugal, where jobseekers are required to work a relatively long period to collect UBs. We find that monthly transitions from employment to unemployment increase by 10% as soon as the eligibility condition is met. This result is driven entirely by transitions to subsidised unemployment, which increase by 20%, as non-subsidised unemployment is not affected. The effects are even larger for the unemployed with high UB replacement ratios or those who meet the eligibility condition from multiple short employment spells. These transitions deserve greater attention from UB agencies and public employment services.

Suggested Citation

  • Martins, Pedro S., 2021. "Working to get fired? Unemployment benefits and employment duration," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 1016-1030.
    • Handle: RePEc:eee:jpolmo:v:43:y:2021:i:5:p:1016-1030
    DOI: 10.1016/j.jpolmod.2021.03.004
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    References listed on IDEAS

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    Cited by:

    1. Martins, Pedro S., 2021. "Which Occupations Do Jobseekers and Firms Look For? Evidence from Three Public Employment Services," GLO Discussion Paper Series 971, Global Labor Organization (GLO).
    2. Garcia-Louzao, Jose, 2022. "Workers’ job mobility in response to severance pay generosity," Labour Economics, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Unemployment insurance; Moral hazard; Employment duration; Big data;
    All these keywords.

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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