The Effect of Unemployment Benefit Generosity on Unemployment Duration: Quasi-Experimental Evidence from Slovenia

29 Pages Posted: 26 Dec 2015

See all articles by Matija Vodopivec

Matija Vodopivec

Bank of Slovenia

Suzana Laporsek

University of Primorska

Primož Dolenc

University of Primorska

Milan Vodopivec

World Bank - Human Development Network; IZA Institute of Labor Economics

Abstract

The paper analyses the effects of a 2011 increase in the unemployment benefit replacement rate on the job-finding rate of Slovenian benefit recipients. Using registry data on the universe of Slovenian unemployment benefit recipients, we exploit legislative changes that selectively increased the replacement rates for certain groups of workers while leaving them unchanged for others. Applying this quasi-experimental approach, we find that increasing the replacement rate significantly decreased the hazard rate of the transition from unemployment to employment, with an implied elasticity of the hazard rate with respect to benefit replacement rate being 0.7 to 0.9. The results also show that the increase of the unemployment benefit replacement rate does not affect the job-finding probability of jobseekers whose reason for unemployment is employer exit, and that the effects of the increase of replacement rate are present only upon exit to employment and not to inactivity.

Keywords: unemployment insurance, unemployment benefit replacement rate, job-finding rate

JEL Classification: J64, J65

Suggested Citation

Vodopivec, Matija and Laporsek, Suzana and Dolenc, Primož and Vodopivec, Milan, The Effect of Unemployment Benefit Generosity on Unemployment Duration: Quasi-Experimental Evidence from Slovenia. IZA Discussion Paper No. 9548, Available at SSRN: https://ssrn.com/abstract=2708361 or http://dx.doi.org/10.2139/ssrn.2708361

Matija Vodopivec (Contact Author)

Bank of Slovenia ( email )

Slovenska cesta 35
Ljubljana, 1505
Slovenia

Suzana Laporsek

University of Primorska ( email )

Cankarjeva 5
Koper, SI-6000
Slovenia

Primož Dolenc

University of Primorska ( email )

Cankarjeva 5
Koper, SI-6000
Slovenia

Milan Vodopivec

World Bank - Human Development Network ( email )

1818 H Street, NW
Washington, DC 20433
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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