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Distributional Impacts of Behavioral Effects – Ex-Ante Evaluation of the 2017 Unemployment Insurance Reform in Finland

Mauri Kotamäki (), Jukka Mattila () and Jussi Tervola ()
Additional contact information
Mauri Kotamäki: Finland Chamber of Commerce, Helsinki, Finland.
Jukka Mattila: Finland Chamber of Commerce, Helsinki, Finland.
Jussi Tervola: Social Insurance Institution of Finland (Kela), Current affiliation: National Institute for Health and Welfare (THL), Helsinki, Finland.

Authors registered in the RePEc Author Service: Mauri Kotamäki

International Journal of Microsimulation, 2018, vol. 11, issue 2, 146-168

Abstract: In 2017, the potential duration of the Finnish earnings-related unemployment benefit was cut from 500 to 400 days (or 400 to 300 working days). We apply a microsimulation method to calculate both static and behavioral ex-ante effects of the reform on employment, public finances and income inequality. Relying on previous empirical literature, we employ three benefit elasticity levels. Individual heterogeneity is added by weighting the elasticities with estimated employment probabilities. According to the static scenario, the reform increases income inequality, albeit marginally. Accounting for the behavioral response mitigates the effect on inequality and more than doubles the effect on public finances.

Keywords: UNEMPLOYMENT INSURANCE; BEHAVIORAL EFFECTS; MICROSIMULATION; INEQUALITY (search for similar items in EconPapers)
JEL-codes: I3 H2 C15 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ijm:journl:v11:y:2018:i:2:p:146-168

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