Six Ways to Leave Unemployment

Abstract

This paper uses a unique Portuguese data set to examine the effect of unemployment benefitreceipt and maximum duration of benefits on escape rates from unemployment. The focus ison the time profile of transitions out of unemployment. The novel aspect of the study residesin its identification of six destination states, namely, open-ended employment, fixed-termcontracts, part-time work, government-provided jobs, self employment, and labor forcewithdrawal. Strong evidence of disincentive effects of the unemployment benefit system isreported. This result obtains both in general and for the various destination states, amongwhich some marked behavioral differences are detected.

Keywords: unemployment benefits, unemployment duration, competing risks

JEL Classification: J64, J65