The effects of unemployment assistance on unemployment exits
Kyyrä, Tomi (2022-09)
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09 / 2022
Many countries have a two-tiered unemployment compensation system that provides earnings-related unemployment insurance for a limited period of time and less generous unemployment assistance thereafter. This study evaluates the effects of a reform in Finland that increased the level of unemployment assistance by 22%. The reform led to a drop of 9% in the unemployment exit hazard, which can be attributed to fewer exits to both employment and inactivity. The implied elasticities suggest that a 10% increase in unemployment assistance reduces the unemployment exit hazard by 4% and the job-finding hazard by 6%. These effects are relatively small compared to the existing evidence on the effects of unemployment insurance benefits.
Unemployment assistance, Labor market subsidy, Hazard rate, Unemployment duration