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The Effects of UI Benefits on Unemployment and Subsequent Outcomes: Evidence from a Kinked Benefit Rule

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  • Tomi Kyyrä
  • Hanna Pesola

Abstract

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.

Suggested Citation

  • Tomi Kyyrä & Hanna Pesola, 2020. "The Effects of UI Benefits on Unemployment and Subsequent Outcomes: Evidence from a Kinked Benefit Rule," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(5), pages 1135-1160, October.
    • Handle: RePEc:bla:obuest:v:82:y:2020:i:5:p:1135-1160
    DOI: 10.1111/obes.12367
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    Cited by:

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    2. 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).
    3. 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.
    4. 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).
    5. Antti Saastamoinen & Mika Kortelainen, 2020. "When Does Money Stick in Education? Evidence from A Kinked Grant Rule," Education Finance and Policy, MIT Press, vol. 15(4), pages 708-735, Fall.
    6. 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.

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    More about this item

    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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