The micro and macro effects of changes in the potential benefit duration

Jonas Jessen, Robin Jessen, Ewa Gałecka-Burdziak, Marek Góra and Jochen Kluve

No 1119, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: We quantify micro and macro effects of changes in the potential benefit duration (PBD) in unemployment insurance. In Poland, the PBD is 12 months for the newly unemployed if the previous year's county unemployment rate is more than 150% of the national average, and 6 months otherwise. We exploit this cut-off using regression discontinuity estimates on registry data containing the universe of unemployed from 2005 to 2019. For those whose PBD is directly affected by the policy rule, benefit recipients younger than 50, a PBD increase from 6 to 12 months leads to 13 percent higher unemployment (the micro effect). The aggregate effect on unemployment (the macro effect, which includes equilibrium effects) is entirely explained by this increase. We find no evidence of spill-overs on two distinct groups of unemployed whose PBD is unchanged and no effect on measures of labour market tightness. We cannot reject that the micro effect equals the macro effect. A decomposition analysis reveals that 12 months after an increase in the PBD, changes in exits from and entries into unemployment each contribute to about half of the overall increase in unemployment.

Keywords: Unemployment benefits; extended benefits; spell duration; separation rate; regression discontinuity (search for similar items in EconPapers)
JEL-codes: H55 J20 J65 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-eur and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:311189

DOI: 10.4419/96973299

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