The effects of unemployment benefits in Italy: evidence from an institutional change

Alfonso Rosolia and Paolo Sestito

No 860, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We document the effects of a change in the Italian Ordinary Unemployment Benefits Scheme on the job search process. As of January 2001, the replacement rate was raised from 30% to 40% and benefits� duration extended from 6 to 9 months for workers aged 50 or more. Our results show that (a) the average duration of benefits' collection increased by around one month for individuals entitled to 3 additional months, while it did not change significantly for those only exposed to higher replacement rates; (b) the pace of re-employment is never found to be statistically different across regimes, although point estimates for those exposed to a longer duration consistently indicate a 2 to 4 percentage points lower probability of re-employment at several horizons. Graphical evidence suggests that job-separation rates did not change with the new regime, while take-up apparently did, although the clear cyclical pattern could bias the picture. We conclude that, if any, the behavioural response induced by the change, must have been modest in economic terms. We discuss the reasons why the response may have been so subdued.

Keywords: unemployment insurance; unemployment duration; replacement rate. (search for similar items in EconPapers)
JEL-codes: J64 J65 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-ias and nep-lab
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Citations: View citations in EconPapers (3)

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Working Paper: The effects of unemployment benefits in Italy: evidence from an institutional change (2012)
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