How changes in financial incentives affect the duration of unemployment

Arbeitspapier

This paper studies how changes in the two key parameters of unemployment insurance – the benefit replacement rate (RR) and the potential duration of benefits (PBD) – affect the duration of unemployment. In 1989, the Austrian government made unemployment insurance more generous by changing, simultaneously, the maximum duration of regular unemployment benefits and the earnings replacement ratio. We find that increasing the replacement ratio has much weaker disincentive effects than increasing the maximum duration of benefits. We use these results to split up the total costs to unemployment insurance funds into costs due to changes in the unemployment insurance system and costs due to behavioral responses of unemployed workers. Results indicate that costs due to behavioural responses are substantial.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1337

Classification and Topics

• Classification: Wirtschaft ; Unemployment: Models, Duration, Incidence, and Job Search ; Unemployment Insurance; Severance Pay; Plant Closings ; Duration Analysis; Optimal Timing Strategies
• Subject: maximum benefit duration ; replacement rate ; unemployment duration ; unemployment insurance ; policy change ; Arbeitslosenversicherung ; Reform ; Arbeitslosigkeit ; Dauer ; Schätzung ; Österreich

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lalive, Rafael ; van Ours, Jan C. ; Zweimüller, Josef
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/18701
• Last update: 10.03.2025, 11:45 AM CET