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
Date Written: May 1, 2016
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: Suggested Citation