Moral hazard among the employed: Evidence from regression discontinuity

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

No 1142, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

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.

Keywords: Unemployment insurance; spell duration; regression discontinuity; endogenous separations (search for similar items in EconPapers)
JEL-codes: H55 J20 J65 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-eur, nep-lab and nep-pbe
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https://www.econstor.eu/bitstream/10419/312428/1/1918823103.pdf (application/pdf)

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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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:312428

DOI: 10.4419/96973325

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