How unemployment benefits affect individuals of different wealth classes

Abstract

Purpose\ud – This paper investigates whether the effect of unemployment benefits (UB) on unemployment duration is the same for individuals belonging to different wealth groups.\ud Design/methodology/approach\ud – Using a sample of newly unemployed individuals from Italy in 2007, we perform estimations of semi‐parametric and parametric Cox hazard models and finds a significant interaction between benefits and wealth.\ud Findings\ud – In particular, we show that the mitigating effect of benefits on liquidity constraints is less marked for individuals from richer households and therefore, for these individuals, benefits do not increase unemployment duration.\ud Originality/value\ud – The results also show that liquidity constraints are important in determining unemployment duration and that wealth has an important role in the actual effect of UB

Measuring and detecting situations of need and deprivation using Graded Response models

“…Second, welfare policies have to take into account their impact on the economic behaviour and incentives of the recipients and this impact actually depends on the initial degree of need of recipient. This latter issue is particularly relevant in labour policies and unemployment insurance systems: in fact, the degree of need affects the job search process and interact with the presence of unemployment benefits (see Bloemen and Stancanelli 2001, Chetty 2008and Corsini 2013.…”