How Does the Unemployment Insurance System Shape the Time Profile of Jobless Duration?

27 Pages Posted: 11 Feb 2004

See all articles by John T. Addison

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics; IZA Institute of Labor Economics

Pedro Portugal

Bank of Portugal - Research Department; New University of Lisbon; IZA Institute of Labor Economics

Date Written: January 2004

Abstract

This paper examines the effects of unemployment insurance on escape rates from unemployment using data from the 1998 Displaced Worker Survey. Transitions from unemployment to employment are modeled using a flexible representation of the baseline hazard function and allowing for discrete changes through time in the effects of unemployment insurance benefits, as well as those of the other covariates. The impact of unemployment insurance is also modeled using a time-varying benefits measure, namely, time to exhaustion of benefits. Potential biases stemming from reverse causation and unobserved individual heterogeneity are accommodated. Both approaches render transparent the major disincentive effects of access to benefits on re-employment rates while also providing evidence of time-varying effects of other regressors.

Keywords: unemployment benefits, unemployment duration, time-varying coefficients/ regressors

JEL Classification: J64, J65

Suggested Citation

Addison, John T. and Portugal, Pedro, How Does the Unemployment Insurance System Shape the Time Profile of Jobless Duration? (January 2004). IZA Discussion Paper No. 978. Available at SSRN: https://ssrn.com/abstract=491562

John T. Addison (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics ( email )

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IZA Institute of Labor Economics

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Pedro Portugal

Bank of Portugal - Research Department ( email )

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+351 21 814 3841 (Fax)

New University of Lisbon

Lisbon, 1099-085
Portugal

IZA Institute of Labor Economics

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

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