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Can a search model predict the effects of an increase in the benefit duration? Evidence from the Portuguese unemployment insurance reform

Author

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  • Álvaro A. Novo

    (Banco de Portugal)

  • André C. Silva

    (Universidade Nova de Lisboa, Campus de Campolide)

Abstract

We test the predictions of an equilibrium search model about the effects of an increase in the maximum duration of unemployment benefits. We use the 1999 unemployment insurance reform of Portugal, a quasi-natural experiment. The reform increased the maximum duration of benefits for three groups of agents and maintained all features of the unemployment insurance for two other groups. We isolate the effects of the increase in the maximum duration of benefits and test the model. The model successfully predicts the effects on the unemployment rate, the labor force participation, and the levels of unemployment and employment.

Suggested Citation

  • Álvaro A. Novo & André C. Silva, 2017. "Can a search model predict the effects of an increase in the benefit duration? Evidence from the Portuguese unemployment insurance reform," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-14, December.
    • Handle: RePEc:spr:izalpo:v:6:y:2017:i:1:d:10.1186_s40173-017-0081-5
    DOI: 10.1186/s40173-017-0081-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment duration; Unemployment benefits; Equilibrium search; Labor market reforms; Quasi-natural experiment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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