Tightening eligibility requirements for unemployment benefits. Impact on educational attainment

Abstract

Imposing stricter eligibility conditions on unemployment insurance (UI) may increase the returns to education investment because these make the consequences of unemployment more severe. In most countries, entitlement to regular UI hinges on completing a qualifying period of work and social contributions. In Belgium, this requirement also exists but is relaxed for education-leavers in that they can substitute time actively searching for a job for employment during the qualifying period. We evaluate the impact on degree completion and dropout of a 2015 reform that withdrew this weaker requirement from graduates aged 25 or over and from high school dropouts younger than 21. We find that the reform significantly increased degree completion and reduced dropout for students in higher education but not for those in high school. We argue that the higher prevalence of behavioral biases among the lower-educated could explain these contrasting findings.