Can a Search Model Predict the Effects of an Increase in the Benefit Duration? Evidence from the Portuguese Unemployment Insurance Reform

18 Pages Posted: 29 Oct 2008 Last revised: 29 Oct 2016

See all articles by Álvaro A. Novo

Álvaro A. Novo

Bank of Portugal; ISEGI, Universidade Nova de Lisboa

Andre C. Silva

Nova School of Business and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2016

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.

Keywords: unemployment duration, unemployment benefits, equilibrium search, labor market reforms, quasi-natural experiment.

JEL Classification: E24, J23, J64

Suggested Citation

Novo, Alvaro A. and Silva, Andre C., Can a Search Model Predict the Effects of an Increase in the Benefit Duration? Evidence from the Portuguese Unemployment Insurance Reform (May 1, 2016). Available at SSRN: https://ssrn.com/abstract=1290693 or http://dx.doi.org/10.2139/ssrn.1290693

Alvaro A. Novo

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

ISEGI, Universidade Nova de Lisboa

1099-085 Lisboa, 1099-085
Portugal

Andre C. Silva (Contact Author)

Nova School of Business and Economics ( email )

Campus de Carcavelos
Carcavelos, 2775-405
Portugal

HOME PAGE: http://sites.google.com/view/andredecastrosilva

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