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Market externalities of large unemployment insurance extension programs

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  • Lalive, Rafael
  • Landais, Camille
  • Zweimüller, Josef

Abstract

We provide evidence that unemployment insurance affects equilibrium conditions in the labor market, which creates significant market externalities. We provide a framework for identification of such equilibrium effects and implement it using the Regional Extension Benefit Program in Austria which extended the duration of UI benefits for a large group of eligible workers in selected regions of Austria. We show that non-eligible workers in REBP regions have higher job finding rates, lower unemployment durations, and a lower risk of long-term unemployment. We discuss the implications of our results for optimal UI policy.

Suggested Citation

  • Lalive, Rafael & Landais, Camille & Zweimüller, Josef, 2015. "Market externalities of large unemployment insurance extension programs," LSE Research Online Documents on Economics 64566, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:64566
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    References listed on IDEAS

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    More about this item

    Keywords

    unemployment insurance;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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