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The effects of unemployment assistance on unemployment exits

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  • Tomi Kyyrä

    (VATT Institute for Economic Research
    IZA)

Abstract

Many countries have a two-tiered unemployment compensation system that provides earnings-related unemployment insurance for a limited period of time and less generous unemployment assistance thereafter. This study evaluates the effects of a reform in Finland that increased the level of unemployment assistance by 22%. The reform led to a drop of 9% in the unemployment exit hazard, which can be attributed to fewer exits to both employment and inactivity. The implied elasticities suggest that a 10% increase in unemployment assistance reduces the unemployment exit hazard by 4% and the job-finding hazard by 6%. These effects are relatively small compared to the existing evidence on the effects of unemployment insurance benefits.

Suggested Citation

  • Tomi Kyyrä, 2023. "The effects of unemployment assistance on unemployment exits," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(6), pages 1457-1480, December.
    • Handle: RePEc:kap:itaxpf:v:30:y:2023:i:6:d:10.1007_s10797-022-09765-7
    DOI: 10.1007/s10797-022-09765-7
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment assistance; Labor market subsidy; Hazard rate; Unemployment duration;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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