The Effects of Shortening Potential Benefit Duration: Evidence from Regional Cut-Offs and a Policy Reform

53 Pages Posted: 15 May 2021

See all articles by Ewa Gałecka-Burdziak

Ewa Gałecka-Burdziak

Warsaw School of Economics

Marek Góra

Warsaw School of Economics (SGH); IZA Institute of Labor Economics

Jonas Jessen

German Institute for Economic Research (DIW Berlin); European University Viadrina; IZA

Robin Jessen

Free University of Berlin (FUB)

Jochen Kluve

RWI; Humboldt University of Berlin; IZA

Abstract

We quantify labour market effects of changes in the potential benefit duration (PBD) in Poland. Individual workers' PBD depends on the county unemployment rate relative to the national average - 12 months of PBD above a cut-off of 125 per cent and 6 months below. This cut-off shifted from 125 to 150 per cent in a 2009 reform. We utilize i) the natural experiment of the reform, and ii) the sharp discontinuity generated by the cut-offs to estimate effects of shortening the PBD. Our administrative data cover unemployment spells for prime age workers during the years 2006-2018. A one-month shorter PBD decreases average benefit duration by 0.5 months and average unemployment duration by 0.4 months. The PBD reduction by six months increased the job finding rate within the first 9 months by 6 percentage points. Using the stock of unemployed per county, we find evidence for positive aggregate employment effects.ment duration by 0.4 months. The PBD reduction by six months increased the job finding rate within the first 9 months by 6 percentage points. Using the stock of unemployed per county, we find evidence for positive market-level employment effects.

JEL Classification: H55, J20, J65

Suggested Citation

Gałecka-Burdziak, Ewa and Góra, Marek and Jessen, Jonas and Jessen, Robin and Kluve, Jochen and Kluve, Jochen, The Effects of Shortening Potential Benefit Duration: Evidence from Regional Cut-Offs and a Policy Reform. IZA Discussion Paper No. 14340, Available at SSRN: https://ssrn.com/abstract=3846684 or http://dx.doi.org/10.2139/ssrn.3846684

Ewa Gałecka-Burdziak (Contact Author)

Warsaw School of Economics ( email )

Warsaw
Poland

Marek Góra

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

IZA Institute of Labor Economics

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

Jonas Jessen

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstr
58
Berlin
Germany

European University Viadrina ( email )

Germany

IZA ( email )

Robin Jessen

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
Berlin, Berlin 14195
Germany

Jochen Kluve

RWI ( email )

Essen
Germany

Humboldt University of Berlin ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

IZA

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

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