Unemployment Duration and the Interactions between Unemployment Insurance and Social Assistance

IGIER Working Paper No. 272

54 Pages Posted: 7 Dec 2004

See all articles by Michele Pellizzari

Michele Pellizzari

University of Geneva - GSEM; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: October 2004

Abstract

The existing studies of unemployment benefit and unemployment duration suggest that reforms that lower either the level or the duration of benefits should reduce unemployment. Despite the large number of such reforms implemented in Europe in the past decades, this paper presents evidence that shows no correlation between the reforms and the evolution of unemployment. This paper also provides an explanation for this fact by exploring the interactions between unemployment benefits and social assistance programmes. Unemployed workers who are also eligible, or expect to become eligible, for some social assistance programmes are less concerned about their benefits being reduced or terminated. They will not search particularly intensively around the time of benefit exhaustion nor will become particularly less choosy about job offers by reducing their reservation wages. Data from the European Community Household Panel (ECHP) are used to provide evidence to support this argument. Results show that, in fact, for social assistance recipients the probability of finding a job is not particularly higher during the last months of entitlement.

Keywords: Unemployment duration, unemployment insurance, social assistance

JEL Classification: J64, J65

Suggested Citation

Pellizzari, Michele, Unemployment Duration and the Interactions between Unemployment Insurance and Social Assistance (October 2004). IGIER Working Paper No. 272. Available at SSRN: https://ssrn.com/abstract=627345 or http://dx.doi.org/10.2139/ssrn.627345

Michele Pellizzari (Contact Author)

University of Geneva - GSEM ( email )

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

IZA Institute of Labor Economics ( email )

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

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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