Estimating the Latent Effect of Unemployment Benefits on Unemployment Duration

Simon Lo, Gesine Stephan and Ralf Wilke

No 6650, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We estimate the effect of a shortening of unemployment benefit entitlements on unemployment duration. Previous studies on the same or related problems have not taken into account that the competing risks duration model is not identified and we shed first light on the question whether the non identification problem may preclude informative results. It turns out that the identification bounds for the parameters of interest are very wide in the absence of strong assumptions. We suggest an assumption on the dependence structure between risks which is milder than what conventional duration models assume. Under this assumption, the identification bounds are tighter and become informative for the direction of the treatment effect. We find evidence that the unemployed with higher pre-unemployment earnings are more likely to enter full-time employment and, in particular, subsidized self-employment.

Keywords: unemployment benefits; unemployment duration; difference-in-differences; partial identification; dependent censoring (search for similar items in EconPapers)
JEL-codes: C34 C41 J64 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-06
New Economics Papers: this item is included in nep-ecm and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - fundamentally revised version published as 'Competing Risks Copula Models for Unemployment Duration: An Application to a German Hartz Reform' in Journal of Econometric Methods, 2017, 6, 1-20

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