Accelerating the transition to employment at benefit exhaustion: still possible after four years of unemployment?
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This paper provides evidence of how the long-term unemployed react to the threat of running out of unemployment insurance (UI) after receiving it for nearly 4 years. To identify the effect of UI exhaustion, we make use of a 1999 Danish legislative change that progressively reduced potential benefit duration from 5 to 4 years. We find that shortening UI duration hastens the transition to employment throughout the unemployment spell up to benefit exhaustion even if it occurs as long as 4 years later. However, although the proportional effect is large, it is small in absolute value.
KeywordsUnemployment duration Benefit entitlement Unemployment insurance UI exhaustion Shortening of UI
JEL ClassificationC41 J65
We would like to thank Michael Svarer, Jan Høgelund, Steven Jenkins, Brian Krogh Graversen, David Grubb, Anders Holm, Ismir Mulalic, and Bo Honoré for helpful comments and Natalie Reid for thoroughly rereading the paper and providing valuable language usage assistance. We would also like to thank an anonymous editor. Next, we are grateful to Aske Egsgaard-Pedersen for research assistance and to participants at EALE 2013 and the SFI Advisory Research Board for comments and suggestions. We also acknowledge financial support from the Strategic Programme for Welfare Research.
Conflict of interest
The authors declare that they have no conflict of interest.
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