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The Effects of UI Benefits on Unemployment and Subsequent Outcomes: Evidence from a Kinked Benefit Rule
Author(s) -
Kyyrä Tomi,
Pesola Hanna
Publication year - 2020
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12367
Subject(s) - unemployment , economics , earnings , labour economics , wage , spell , duration (music) , demographic economics , macroeconomics , art , literature , accounting , sociology , anthropology
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.