Benefit Duration, Unemployment Duration and Job Match Quality: A Regression-Discontinuity Approach

37 Pages Posted: 23 Apr 2010

See all articles by Marco Caliendo

Marco Caliendo

University of Potsdam; Institute for the Study of Labor (IZA)

Konstantinos Tatsiramos

University of Luxembourg; Luxembourg Institute of Socio-Economic Research (LISER)

Arne Uhlendorff

IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2009

Abstract

The generosity of the Unemployment Insurance system (UI) plays a central role for the job search behavior of unemployed individuals. Standard search theory predicts that an increase in UI benefit generosity, either in terms of benefit duration or entitlement, has a negative impact on the job search activities of the unemployed increasing their unemployment duration. Despite the disincentive effect of UI on unemployment duration, UI benefit generosity may also increase job match quality by allowing individuals to wait for better job offers. In this paper we use a sharp discontinuity in the maximum duration of unemployment benefits in Germany, which increases from 12 months to 18 months at the age of 45, to identify the effect of extended benefit duration on unemployment duration and post-unemployment outcomes. We find a spike in the re-employment hazard for the unemployed workers with 12 months benefit duration, which occurs around benefit exhaustion. This leads to lower unemployment duration compared to their counterparts with 18 months benefit duration. However, we also show that those unemployed who obtain jobs close to and after the time when benefits are exhausted are significantly more likely to exit subsequent employment and receive lower wages compared to their counterparts with extended benefit duration.

Keywords: Unemployment Benefits, Unemployment Duration, Employment Probability, Job Match Quality, Regression Discontinuity

JEL Classification: C41, J64

Suggested Citation

Caliendo, Marco and Tatsiramos, Konstantinos and Uhlendorff, Arne, Benefit Duration, Unemployment Duration and Job Match Quality: A Regression-Discontinuity Approach (December 1, 2009). DIW Berlin Discussion Paper No. 967. Available at SSRN: https://ssrn.com/abstract=1594787 or http://dx.doi.org/10.2139/ssrn.1594787

Marco Caliendo (Contact Author)

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany
+49(0)331/9773225 (Phone)
+49(0)331/9773210 (Fax)

HOME PAGE: http://www.uni-potsdam.de/en/empwifo/news.html

Institute for the Study of Labor (IZA) ( email )

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

Konstantinos Tatsiramos

University of Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Luxembourg Institute of Socio-Economic Research (LISER) ( email )

11, Porte des Sciences
Campus Belval – Maison des Sciences Humaines
Esch-sur-Alzette, L-4366
Luxembourg

Arne Uhlendorff

IZA Institute of Labor Economics ( email )

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

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