Moral Hazard among the Employed: Evidence from Regression Discontinuity

Jonas Jessen, Robin Jessen, Andrew Johnston and Ewa Gałecka-Burdziak

No 33450, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We exploit policy discontinuities in Poland's unemployment insurance to examine the causal effect of changes to both benefit durations and levels. Using a regression discontinuity approach, we uncover three findings: (1) Higher benefit levels distort employment more than benefit extensions. (2) Benefit durations and levels interact: Longer durations substantially increase the distortionary effect of more generous payments. (3) Higher payments increase the transition of employed workers into unemployment. We develop a model of optimal unemployment insurance that accounts for moral hazard among both employed and unemployed workers. Notably, for level increases, distortionary costs are larger among the employed than unemployed.

JEL-codes: H0 H53 J65 (search for similar items in EconPapers)
Date: 2025-02
New Economics Papers: this item is included in nep-eur and nep-lab
Note: LS PE
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Related works:
Working Paper: Moral hazard among the employed: Evidence from regression discontinuity (2025)
Working Paper: Moral Hazard among the Employed: Evidence from Regression Discontinuity (2024)
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