Front-Loading the Unemployment Benefit: An Empirical Assessment

Abstract

We estimate the effect of front-loading unemployment benefit payments on nonemployment duration and reemployment wages. Exploiting a sharp change in the path of benefits for those who claimed unemployment benefits after November 1, 2005 in Hungary, we show that nonemployment duration fell by two weeks, while reemployment wages rose by 1.4 percent as a result of front-loading. We show that these behavioral responses were large enough to offset the mechanical cost increase of the unemployment insurance. We argue that our results indicate that benefit front-loading was a Pareto improving policy reform as both unemployed and employed workers were made better off. (JEL D91, J31, J64, J65)

Switching from an inclining to a zero-level unemployment benefit profile: Good for work incentives?

“…On the one hand, the prospect of not qualifying for UB is likely to induce many unemployed youths to become less selective in their job acceptance decision. On the other hand, the reform may also induce young graduates to find jobs earlier in the unemployment spell when higher quality jobs are available (Lindner and Reizer, 2019). The last channel requires, however, that the reform effectively induces youths to accelerate job finding early in the waiting period, which we do not expect given the length of this period.…”

Répondre aux défis du marché du travail en Belgique

“…L'expérience de la Hongrie porte à croire que les réformes qui concentrent les allocations de chômage en début de période peuvent faire baisser le chômage et être neutre en termes de recettes, même si les allocations augmentent à court terme (Lindner et al, 2016 ;DellaVigna et al, 2017 ;encadré 7). Toutefois, cela n'implique pas nécessairement qu'il est souhaitable, sur le plan social, d'accélérer la diminution des allocations de chômage, car une hausse du taux de sortie du chômage peut en partie dénoter une aggravation des difficultés financières des chômeurs.…”

“…L'évaluation de la réforme semble indiquer que l'accélération de la diminution des allocations de chômage dans le temps a fait reculer le chômage (Della Vigna et al, 2017) et n'a pas eu d'incidence sur les recettes en dépit de l'augmentation initiale des allocations (Lindner et al, 2016). Plus spécifiquement, Della Vigna et al (2017) constatent qu'après la réforme, les sorties du chômage ont connu une forte hausse aux alentours du seuil des 90 jours, puis convergé, pendant les phases ultérieures, vers le niveau antérieur à la réforme.…”

The Trade‐Off between Insurance and Incentives in Differentiated Unemployment Policies

“…‘A compulsory government program prevents adverse selection from driving out the insurance coverage, but of course it is still true that when workers are not all alike, some of them have much more to gain from the program than others, and I am ignoring this.’ A number of studies have contributed to filling this gap: for example, Shavell and Weiss (), Hopenhayn and Nicolini (), Shimer and Werning (), Kolsrud et al. () and Lindner and Reizer () on the dynamic profile of benefits; Schmieder, Von Wachter and Bender (), Kroft, Lange and Notowidigdo () and Landais, Michaillat and Saez (,b) on benefits over the business cycle; and Michelacci and Ruffo () on benefits over the life cycle. But, overall, understanding the vast differences in UI policies both across and within countries is an understudied area.…”