Work incentives and other effects of the transition to social assistance: Evidence from the Slovak Republic

Abstract

In this paper we investigate whether the potential disincentive effects of the Slovak benefit system have an actual meaning. Using data from subsequent labour force surveys we study the determinants of the outflow from unemployment to a job and the determinants of the outflow to out of the labour force. We find that single unemployed, highly educated unemployed and unemployed living in the capital Bratislava have higher exit rates both to a job and to out of the labour force. The characteristic with a distinctly different effect on both exit rates is the previous labour market position We also find that there are fluctuations in the hazard rate over the duration of unemployment. However, these fluctuations are not very informative. The direct indicators of the type of unemployment benefit do not affect the exit rates, neither do the indirect indicators like, for example, the presence of young children. Although there are potential disincentive effects in the Slovak benefit system we find no evidence that these potential effects materialise.