Can a search model predict the effects of an increase in the benefit duration? Evidence from the Portuguese unemployment insurance reform

Álvaro A. Novo () and Andre Silva ()
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Álvaro A. Novo: Banco de Portugal

IZA Journal of Labor Policy, 2017, vol. 6, issue 1, 1-14

Abstract: Abstract We test the predictions of an equilibrium search model about the effects of an increase in the maximum duration of unemployment benefits. We use the 1999 unemployment insurance reform of Portugal, a quasi-natural experiment. The reform increased the maximum duration of benefits for three groups of agents and maintained all features of the unemployment insurance for two other groups. We isolate the effects of the increase in the maximum duration of benefits and test the model. The model successfully predicts the effects on the unemployment rate, the labor force participation, and the levels of unemployment and employment.

Keywords: Unemployment duration; Unemployment benefits; Equilibrium search; Labor market reforms; Quasi-natural experiment (search for similar items in EconPapers)
JEL-codes: E24 J23 J64 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1186/s40173-017-0081-5

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