Market Externalities of Large Unemployment Insurance Extension Programs

Rafael Lalive, Camille Landais and Josef Zweimüller ()

No 7650, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper offers quasi experimental evidence of the existence of spillover effects of UI extensions using a unique program that extended unemployment benefits drastically for a subset of workers in selected regions of Austria. We use non-eligible unemployed in treated regions, and a difference-in-difference identification strategy to control for preexisting differences across treated and untreated regions. We uncover the presence of important spillover effects: in treated regions, as the search effort of treated workers plummets, the job finding probability of untreated workers increases, and their average unemployment duration and probability of long term unemployment decrease. These effects are the largest when the program intensity reaches its highest level, then decrease and disappear as the program is scaled down and finally interrupted. We use this evidence to assess the relevance of different assumptions on technology and the wage setting process in equilibrium search and matching models and discuss the policy implications of our results for the EUC extensions in the US.

Keywords: market externality; benefit extension; unemployment insurance; macro effects (search for similar items in EconPapers)
JEL-codes: J21 J22 J65 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2013-09
New Economics Papers: this item is included in nep-ias and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published - published in: American Economic Review, 2015, 105 (12), 3564-3596

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https://docs.iza.org/dp7650.pdf (application/pdf)

Related works:
Journal Article: Market Externalities of Large Unemployment Insurance Extension Programs (2015)
Working Paper: Market externalities of large unemployment insurance extension programs (2015)
Working Paper: Market Externalities of Large Unemployment Insurance Extension Programs (2013)
Working Paper: Market Externalities of Large Unemployment Insurance Extension Programs (2013)
Working Paper: Market Externalities of Large Unemployment Insurance Extension Programs (2013)
Working Paper: Market Externalities of Large Unemployment Insurance Extension Programs (2013)
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