Timed to Say Goodbye: Does Unemployment Benefit Eligibility Affect Worker Layoffs?

53 Pages Posted: 21 May 2019

See all articles by Andrea Albanese

Andrea Albanese

Luxembourg Institute of Socio-Economic Research (LISER); Ghent University; IZA Institute of Labor Economics

Corinna Ghirelli

Bank of Spain

Matteo Picchio

Marche Polytechnic University - Department of Economic and Social Science; IZA Institute of Labor Economics; SHERPPA - Ghent University

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Abstract

We study how unemployment benefit eligibility affects the layoff exit rate by exploiting quasi-experimental variation in eligibility rules in Italy. By using a difference-indifferences estimator, we find an instantaneous increase of about 12% in the layoff probability when unemployment benefit eligibility is attained, which persists for about 16 weeks. These findings are robust to different identifying assumptions and are mostly driven by jobs started after the onset of the Great Recession, in the South and for small firms. We argue that the moral hazard from the employer's side is the main force driving these layoffs.

Keywords: unemployment insurance, layoffs, employer-employee moral hazard, difference-in-differences, heterogeneous effects

JEL Classification: C31, C41, J21, J63, J65

Suggested Citation

Albanese, Andrea and Ghirelli, Corinna and Picchio, Matteo, Timed to Say Goodbye: Does Unemployment Benefit Eligibility Affect Worker Layoffs?. IZA Discussion Paper No. 12171, Available at SSRN: https://ssrn.com/abstract=3390158 or http://dx.doi.org/10.2139/ssrn.3390158

Andrea Albanese (Contact Author)

Luxembourg Institute of Socio-Economic Research (LISER)

11 Porte des Sciences
Esch-sur-Alzette, L-4366
Luxembourg

Ghent University ( email )

Ghent, B-9000
Belgium

IZA Institute of Labor Economics ( email )

P.O. Box 7240
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Germany

Corinna Ghirelli

Bank of Spain ( email )

Calle Alcala, 48
Madrid, 28014
Spain

Matteo Picchio

Marche Polytechnic University - Department of Economic and Social Science ( email )

Piazzale Martelli, 8
60121 Ancona
Italy
+39 071 220 7176 (Phone)

HOME PAGE: http://www.univpm.it/matteo.picchio

IZA Institute of Labor Economics ( email )

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

SHERPPA - Ghent University ( email )

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Ghent, B-9000
Belgium

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