Do Benefit Cuts Boost Job Findings? Swedish Evidence from the 1990s

33 Pages Posted: 15 Dec 1999

See all articles by Kenneth Carling

Kenneth Carling

Uppsala University

Bertil Holmlund

Uppsala University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Altin Vejsiu

Uppsala University - Department of Economics

Date Written: November 2000

Abstract

In June 1995, the Swedish parliament decided to cut the replacement rate in unemployment insurance from 80 percent to 75 percent, a change that took effect on January 1, 1996. This paper examines how this change affected job finding rates among unemployed insured individuals. To identify the effect of the policy we exploit a quasi-experimental feature of the benefit cut: only a fraction of the unemployed was affected by the reduction in replacement rates. We compare the evolution of job finding rates before and after the reform among those affected and those not affected. Our estimates suggest that the reform caused an increase in the transition rate of roughly 10 percent. There is also evidence of anticipatory behavior among the unemployed; the effects of the reform seem to operate several months before its actual implementation in January 1996.

Keywords: Unemployment duration, unemployment benefits

JEL Classification: J64, J65

Suggested Citation

Carling, Kenneth and Holmlund, Bertil and Vejsiu, Altin, Do Benefit Cuts Boost Job Findings? Swedish Evidence from the 1990s (November 2000). Uppsala University Economics Working Paper No. 1999:20, CESifo Working Paper Series No. 365. Available at SSRN: https://ssrn.com/abstract=191949

Kenneth Carling (Contact Author)

Uppsala University ( email )

Office of Labour Market Policy Evaluation
SE-751 20 Uppsala
Sweden
+46-18-4717087 (Phone)

Bertil Holmlund

Uppsala University - Department of Economics ( email )

SE-75120 Uppsala
Sweden
+46 18 471 1122 (Phone)
+46 18 471 1478 (Fax)

HOME PAGE: http://www.nek.uu.se/faculty/holmlund/index.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

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

Altin Vejsiu

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden
+46-18-4717092 (Phone)

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