Unemployment Insurance Take-up and Cash-on-Hand

Andreas Kettemann and Francois Fontaine
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Andreas Kettemann: University of Zürich

No 955, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: A large fraction of the eligible workers do not claim for unemployment benefits and the existing literature has shown that take-up is sensitive to both the costs and the benefits of claiming. Our paper is the first to evaluate the welfare loss due to claiming costs. For that purpose, we first present a simple search model where heterogeneous workers face a cost to claim for unemployment benefits and can partially smooth consumption using savings. We show that estimates from a regression discontinuity design can be used to compute a money metric of the welfare loss if the worker does not receive benefits. Using discontinuities in eligibility to severance payments and to extended unemployment benefits in Austria, we provide such estimates. Our results point towards large and heterogeneous welfare loss for those who don't obtain unemployment insurance.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:955

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