IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp14340.html
   My bibliography  Save this paper

The Effects of Shortening Potential Benefit Duration: Evidence from Regional Cut-Offs and a Policy Reform

Author

Listed:
  • Galecka-Burdziak, Ewa

    (Warsaw School of Economics)

  • Góra, Marek

    (Warsaw School of Economics)

  • Jessen, Jonas

    (WZB - Social Science Research Center Berlin)

  • Jessen, Robin

    (RWI)

  • Kluve, Jochen

    (KfW Development Bank)

Abstract

We quantify labour market effects of changes in the potential benefit duration (PBD) in Poland. Individual workers' PBD depends on the county unemployment rate relative to the national average - 12 months of PBD above a cut-off of 125 per cent and 6 months below. This cut-off shifted from 125 to 150 per cent in a 2009 reform. We utilize i) the natural experiment of the reform, and ii) the sharp discontinuity generated by the cut-offs to estimate effects of shortening the PBD. Our administrative data cover unemployment spells for prime age workers during the years 2006-2018. A one-month shorter PBD decreases average benefit duration by 0.5 months and average unemployment duration by 0.4 months. The PBD reduction by six months increased the job finding rate within the first 9 months by 6 percentage points. Using the stock of unemployed per county, we find evidence for positive aggregate employment effects.ment duration by 0.4 months. The PBD reduction by six months increased the job finding rate within the first 9 months by 6 percentage points. Using the stock of unemployed per county, we find evidence for positive market-level employment effects.

Suggested Citation

  • Galecka-Burdziak, Ewa & Góra, Marek & Jessen, Jonas & Jessen, Robin & Kluve, Jochen, 2021. "The Effects of Shortening Potential Benefit Duration: Evidence from Regional Cut-Offs and a Policy Reform," IZA Discussion Papers 14340, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14340
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp14340.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. de Groot, Nynke & van der Klaauw, Bas, 2019. "The effects of reducing the entitlement period to unemployment insurance benefits," Labour Economics, Elsevier, vol. 57(C), pages 195-208.
    2. Kluve, Jochen & Lehmann, Hartmut & Schmidt, Christoph M., 2008. "Disentangling Treatment Effects of Active Labor Market Policies: The Role of Labor Force Status Sequences," Labour Economics, Elsevier, vol. 15(6), pages 1270-1295, December.
    3. Marinescu, Ioana, 2017. "The general equilibrium impacts of unemployment insurance: Evidence from a large online job board," Journal of Public Economics, Elsevier, vol. 150(C), pages 14-29.
    4. Marcus Hagedorn & Iourii Manovskii & Kurt Mitman, 2015. "The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?," NBER Working Papers 20884, National Bureau of Economic Research, Inc.
    5. Baguelin, Olivier & Remillon, Delphine, 2014. "Unemployment insurance and management of the older workforce in a dual labor market: Evidence from France," Labour Economics, Elsevier, vol. 30(C), pages 245-264.
    6. Kyyrä, Tomi & Pesola, Hanna, 2020. "Long-term effects of extended unemployment benefits for older workers," Labour Economics, Elsevier, vol. 62(C).
    7. Hunt, Jennifer, 1995. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 88-120, January.
    8. Phillip B. Levine, 1993. "Spillover Effects between the Insured and Uninsured Unemployed," ILR Review, Cornell University, ILR School, vol. 47(1), pages 73-86, October.
    9. Rafael Lalive & Jan Van Ours & Josef Zweimuller, 2006. "How Changes in Financial Incentives Affect the Duration of Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 1009-1038.
    10. Stefano Della & Jörg Heining & Johannes F Schmieder & Simon Trenkle, 2023. "Evidence on Job Search Models from a Survey of Unemployed Workers in Germany," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(2), pages 1181-1232.
    11. van Ours, J.C. & Vodopivec, M., 2006. "Shortening the Potential Duration of Unemployment Benefits does not affect the Quality of Post-Unemployed Jobs : Evidence from a Natural Experiment," Discussion Paper 2006-56, Tilburg University, Center for Economic Research.
    12. Rafael Lalive & Camille Landais & Josef Zweimüller, 2015. "Market Externalities of Large Unemployment Insurance Extension Programs," American Economic Review, American Economic Association, vol. 105(12), pages 3564-3596, December.
    13. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, April.
    14. Kyyrä, Tomi & Pesola, Hanna, 2020. "The effects of unemployment benefit duration: Evidence from residual benefit duration," Labour Economics, Elsevier, vol. 65(C).
    15. Chetty, Raj, 2006. "A general formula for the optimal level of social insurance," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1879-1901, November.
    16. Andrew C. Johnston & Alexandre Mas, 2018. "Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2480-2522.
    17. Kurt Mitman & Iourii Manovskii & Fatih Karahan & Marcus Hagedorn, 2013. "Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects," 2013 Meeting Papers 1260, Society for Economic Dynamics.
    18. Camille Landais, 2015. "Assessing the Welfare Effects of Unemployment Benefits Using the Regression Kink Design," American Economic Journal: Economic Policy, American Economic Association, vol. 7(4), pages 243-278, November.
    19. Michael P. Keane & Nada Wasi, 2016. "Labour Supply: The Roles of Human Capital and The Extensive Margin," Economic Journal, Royal Economic Society, vol. 0(592), pages 578-617, May.
    20. David Card & Raj Chetty & Andrea Weber, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," American Economic Review, American Economic Association, vol. 97(2), pages 113-118, May.
    21. Lalive, Rafael, 2008. "How do extended benefits affect unemployment duration A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 785-806, February.
    22. Camille Landais & Pascal Michaillat & Emmanuel Saez, 2018. "A Macroeconomic Approach to Optimal Unemployment Insurance: Theory," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 152-181, May.
    23. Jesse Rothstein, 2011. "Unemployment Insurance and Job Search in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 143-213.
    24. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
    25. Marcus Hagedorn & Fatih Karahan & Iourii Manovskii & Kurt Mitman, 2013. "Unemployment Benefits and Unemployment in the Great Recession: The Role of Equilibrium Effects," Staff Reports 646, Federal Reserve Bank of New York.
    26. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
    27. Sebastian Calonico & Matias D. Cattaneo & Rocío Titiunik, 2015. "Optimal Data-Driven Regression Discontinuity Plots," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 110(512), pages 1753-1769, December.
    28. Ariella Kahn-Lang & Kevin Lang, 2020. "The Promise and Pitfalls of Differences-in-Differences: Reflections on 16 and Pregnant and Other Applications," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 38(3), pages 613-620, July.
    29. van Ours, Jan C. & Vodopivec, Milan, 2006. "Shortening the Potential Duration of Unemployment Benefits Does Not Affect the Quality of Post-Unemployment Jobs: Evidence from," CEPR Discussion Papers 5741, C.E.P.R. Discussion Papers.
    30. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-438, April.
    31. Shaw, Kathryn L, 1989. "Life-Cycle Labor Supply with Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 431-456, May.
    32. Card, David & Levine, Phillip B., 2000. "Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 107-138, October.
    33. Christopher Boone & Arindrajit Dube & Lucas Goodman & Ethan Kaplan, 2021. "Unemployment Insurance Generosity and Aggregate Employment," American Economic Journal: Economic Policy, American Economic Association, vol. 13(2), pages 58-99, May.
    34. Shavell, Steven & Weiss, Laurence, 1979. "The Optimal Payment of Unemployment Insurance Benefits over Time," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1347-1362, December.
    35. Rafael Lalive & Jan Ours & Josef Zweimüller, 2011. "Equilibrium unemployment and the duration of unemployment benefits," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1385-1409, October.
    36. Le Barbanchon, Thomas, 2016. "The effect of the potential duration of unemployment benefits on unemployment exits to work and match quality in France," Labour Economics, Elsevier, vol. 42(C), pages 16-29.
    37. Rafael Lalive, 2007. "Unemployment Benefits, Unemployment Duration, and Post-Unemployment Jobs: A Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 97(2), pages 108-112, May.
    38. Marco Caliendo & Konstantinos Tatsiramos & Arne Uhlendorff, 2013. "Benefit Duration, Unemployment Duration And Job Match Quality: A Regression‐Discontinuity Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 604-627, June.
    39. Camille Landais & Pascal Michaillat & Emmanuel Saez, 2018. "A Macroeconomic Approach to Optimal Unemployment Insurance: Applications," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 182-216, May.
    40. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
    41. van Ours, Jan C. & Vodopivec, Milan, 2006. "Shortening the Potential Duration of Unemployment Benefits Does Not Affect the Quality of Post-Unemployment Jobs: Evidence from a Natural Experiment," IZA Discussion Papers 2171, Institute of Labor Economics (IZA).
    42. Jan C. van Ours & Milan Vodopivec, 2006. "How Shortening the Potential Duration of Unemployment Benefits Affects the Duration of Unemployment: Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 351-378, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jessen, Jonas & Jessen, Robin & Galecka-Burdziak, Ewa & Góra, Marek & Kluve, Jochen, 2023. "The Micro and Macro Effects of Changes in the Potential Benefit Duration," IZA Discussion Papers 15978, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jessen, Jonas & Jessen, Robin & Galecka-Burdziak, Ewa & Góra, Marek & Kluve, Jochen, 2023. "The Micro and Macro Effects of Changes in the Potential Benefit Duration," IZA Discussion Papers 15978, Institute of Labor Economics (IZA).
    2. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    3. Johannes F. Schmieder & Till von Wachter, 2016. "The Effects of Unemployment Insurance Benefits: New Evidence and Interpretation," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 547-581, October.
    4. Andrew C. Johnston & Alexandre Mas, 2018. "Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2480-2522.
    5. Arash Nekoei & Andrea Weber, 2017. "Does Extending Unemployment Benefits Improve Job Quality?," American Economic Review, American Economic Association, vol. 107(2), pages 527-561, February.
    6. Marta C. Lopes, 2022. "A review on the elasticity of unemployment duration to the potential duration of unemployment benefits," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1212-1224, September.
    7. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142.
    8. Camille Landais & Pascal Michaillat & Emmanuel Saez, 2018. "A Macroeconomic Approach to Optimal Unemployment Insurance: Applications," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 182-216, May.
    9. Inna Petrunyk & Christian Pfeifer, 2018. "Shortening the potential duration of unemployment benefits and labor market outcomes: Evidence from a natural experiment in Germany," Working Paper Series in Economics 377, University of Lüneburg, Institute of Economics.
    10. Camille Landais, 2015. "Assessing the Welfare Effects of Unemployment Benefits Using the Regression Kink Design," American Economic Journal: Economic Policy, American Economic Association, vol. 7(4), pages 243-278, November.
    11. Rafael Lalive & Camille Landais & Josef Zweimüller, 2015. "Market Externalities of Large Unemployment Insurance Extension Programs," American Economic Review, American Economic Association, vol. 105(12), pages 3564-3596, December.
    12. Steven Dieterle & Otávio Bartalotti & Quentin Brummet, 2020. "Revisiting the Effects of Unemployment Insurance Extensions on Unemployment: A Measurement-Error-Corrected Regression Discontinuity Approach," American Economic Journal: Economic Policy, American Economic Association, vol. 12(2), pages 84-114, May.
    13. Fredriksson, Peter & Söderström, Martin, 2020. "The equilibrium impact of unemployment insurance on unemployment: Evidence from a non-linear policy rule," Journal of Public Economics, Elsevier, vol. 187(C).
    14. Gabriel Chodorow-Reich & Loukas Karabarbounis, 2016. "The Limited Macroeconomic Effects of Unemployment Benefit Extensions," Working Papers 733, Federal Reserve Bank of Minneapolis.
    15. Kyyrä, Tomi & Pesola, Hanna, 2020. "The effects of unemployment benefit duration: Evidence from residual benefit duration," Labour Economics, Elsevier, vol. 65(C).
    16. Martín-Román, Ángel L., 2022. "Beyond the added-worker and the discouraged-worker effects: the entitled-worker effect," Economic Modelling, Elsevier, vol. 110(C).
    17. Mitman, Kurt & Rabinovich, Stanislav, 2021. "Whether, when and how to extend unemployment benefits: Theory and application to COVID-19," Journal of Public Economics, Elsevier, vol. 200(C).
    18. Kyyrä, Tomi & Pesola, Hanna & Rissanen, Aarne, 2017. "Unemployment Insurance in Finland: A Review of Recent Changes and Empirical Evidence on Behavioral Responses," Research Reports 184, VATT Institute for Economic Research.
    19. Albanese, Andrea & Picchio, Matteo & Ghirelli, Corinna, 2020. "Timed to Say Goodbye: Does Unemployment Benefit Eligibility Affect Worker Layoffs?," Labour Economics, Elsevier, vol. 65(C).
    20. Johannes Spinnewijn, 2020. "The Trade‐Off between Insurance and Incentives in Differentiated Unemployment Policies," Fiscal Studies, John Wiley & Sons, vol. 41(1), pages 101-127, March.

    More about this item

    Keywords

    extended benefits; unemployment benefits; spell duration;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp14340. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.