Level Of Unemployment Benefits Research Articles

UNEMPLOYMENT BENEFITS AND INCOME INEQUALITY: THE ARMENIAN EXPERIENCE

This paper analyzes the role and effects of unemployment benefits on income distribution in Armenia with regard to the contemporary problems like the COVID-19 pandemic and the Artsakh-Azerbaijani war. As an empirical work the research applying a quantitative model analyses the impact of the state-funded unemployment benefits on income inequality across the population. The results show that unemployment benefits in Ar-menia had a regressive nature and therefore did not perform the task of income redist-ribution by directing funds to those in need (first quantile), but rather to the inhabitants with the higher incomes (fifth quantile). Moreover, there is no evidence that the level of unemployment benefits causes unemployment, suggesting that low benefit amounts did not discourage job-seeking behavior. Because of these results, the unintended disad-vantages of the Armenian unemployment benefit system are revealed and it is confirmed that its cancellation in 2014 was justified. The study is an important addition to the ongoing discourses concerning the characteristics of labor market institutions.

Class Conflict or Consensus? Understanding Social Partner Positions on Social Policy Reforms

Abstract This paper addresses the positions of unions and employer associations towards the level of unemployment benefits and active labour market policy (ALMP). These are prominent examples of social compensation and social investment policies respectively. The new dataset ‘Reform Monitor on Political Conflict’ (ReMoPo) is based on expert interviews and a systematic text analysis of all relevant press releases. Over a time-span of 14 years (2000-2014) the data clearly shows conflict between social partners on the level of unemployment benefits whilst there is consensus towards ALMP. I show that, for unemployment benefits, different motivations do lead to different positions. However, for ALMP, different motivations combine with overlapping interests, resulting in a common positive stance. The main theoretical implications of these findings were two-fold: firstly, the type of organisation does not predict positioning on welfare state issues, whereas pragmatic considerations do. Secondly, I suspect that the divergence of motivational factors combined with a consensus towards particular measures is specific to the concept of social investment. This is because social investments (training and qualification measures in this case) were expected to have the most far-reaching and long-lasting positive effects on both individuals and companies and were therefore supported by unions and employer associations.

A Quantitative Comparison of Unemployment Benefit Extension and Level Increase

A Quantitative Comparison of Unemployment Benefit Extension and Level Increase

Moral Hazard Versus Liquidity and the Optimal Timing of Unemployment Benefits

Abstract We develop a novel way of identifying the liquidity and moral hazard effects of unemployment insurance exclusively from how job-finding rates respond to unemployment benefits that vary over an unemployment spell. We derive a sufficient statistics formula for the dynamically optimal level of unemployment benefits based on these two effects. Using a regression kink design (RKD) that simultaneously exploits two kinks in the schedule of unemployment benefits, we apply our method to Spain for the years 1992–2012 and find that moral hazard effects dominated liquidity effects, suggesting that Spanish unemployment benefits exceeded the optimal level in that period.

Unemployment Insurance and Opioid Overdose Mortality in the United States.

Over the past two decades, opioid overdose deaths contributed to the dramatic rise in all-cause mortality among non-Hispanic Whites. To date, efforts among scholars to understand the role of local area labor market conditions on opioid overdose mortality have led to mixed results. We argue the reason for these disparate findings is scholars have not considered the moderating effects of income support policies such as unemployment insurance. The present study leverages two sources of variation-county mass layoffs and changes in the generosity of state unemployment insurance benefits-to investigate if unemployment benefits moderate the relationship between job loss and county opioid overdose death rates. Our difference-in-differences estimation strategy reveals that the harmful effects of job loss on opioid overdose mortality decline with increasing state unemployment insurance benefit levels. These findings suggest that social policy in the form of income transfers played a crucial role in disrupting the link between job loss and opioid overdose mortality.

(In)efficient Separations, Firing Costs and Temporary Contracts

In this paper we study the allocative (in)efficiency of employment protection in relation to firing costs, in a general equilibrium model with labor market frictions. The optimal firing costs depend on the level of unemployment benefits and the degree of centralized wage bargaining, two features of the labor market that induce downward wage rigidity and trigger inefficient employment separations. When restrictions on firing employees with permanent contracts are inefficiently high, the introduction of temporary contracts improves welfare but does not fully restore efficiency. A quantitative analysis for the Italian economy shows that the firing costs before the recent labor market reforms were 30% higher than the optimal level, implying a consumption loss of almost 2% in the steady state. The introduction of fixed-term jobs in the early 2000’s closed one fourth of the gap between inefficient and efficient allocation, although it led to higher unemployment rates and turnover.

COVID-19 Is Also a Reallocation Shock

Drawing on firm-level forecasts at a one-year horizon in the Survey of Business Uncertainty (SBU), we construct novel, forward-looking reallocation measures for jobs and sales. These measures rise sharply after February 2020, reaching rates in April that are 2.4 (3.9) times the pre-COVID average for jobs (sales). We also draw on special SBU questions to estimate that the COVID-19 shock caused 3 new hires for every 10 layoffs, that 32-42% of COVID-induced layoffs will be permanent, and that one-tenth of all work days (one-fifth for office workers) will shift from business premises to residences in the post-pandemic world relative to the pre-pandemic situation. Our survey evidence aligns well with anecdotal evidence of large pandemic-induced demand increases at many firms, evidence on job openings, gross job creation and gross business formation, and a sharp pandemic-induced rise in equity return dispersion across firms. After developing the evidence, we consider implications for the economic outlook and for policy responses to the pandemic. Unemployment benefit levels that exceed worker earnings, policies that subsidize employee retention, land-use restrictions, occupational licensing restrictions, and regulatory barriers to business formation will impede reallocation responses to the COVID-19 shock.

The role of the origin country in migration aspirations: A cross‐national comparison of Master students in Portugal and the Netherlands

AbstractWith this comparative study, we aim for a better understanding of the role of the origin country in shaping migration aspirations. Using experimental data collected among a sample of Master students in Portugal and the Netherlands, we tested whether the impact of labour market and welfare state‐related factors on migration aspirations varied between these two origin countries. In line with our expectation, potential gains of migration in terms of job opportunities and wages had a stronger positive impact on migration aspirations for the Portuguese as compared with the Dutch respondents. For Portugal and the Netherlands alike, migration aspirations were lower when the level of unemployment benefits in the destination country was lower than in the origin country. Our findings indicated that conditions in the origin country, as well as the individual's life stage, shape which characteristics of the destination country are most important for migration aspirations.

COVID-19 Is Also a Reallocation Shock

:We develop several pieces of evidence about the reallocative effects of the COVID-19 shock on impact and over time. First, the shock caused three to four new hires for every ten layoffs from March 1 to mid-May 2020. Second, we project that one-third or more of the layoffs during this period are permanent in the sense that job losers won't return to their old jobs at their previous employers. Third, firm-level forecasts at a one-year horizon imply rates of expected job and sales reallocation that are two to five times larger from April to June 2020 than before the pandemic. Fourth, full days working from home will triple from 5 percent of all workdays in 2019 to more than 15 percent after the pandemic ends. We also document pandemic-induced job gains at many firms and a sharp rise in cross-firm equity return dispersion in reaction to the pandemic. After developing the evidence, we consider implications for the economic outlook and for policy. Unemployment benefit levels that exceed worker earnings, policies that subsidize employee retention irrespective of the employer's commercial outlook, and barriers to worker mobility and business formation impede reallocation responses to the COVID-19 shock.

Optimal taxation and insurance using machine learning — Sufficient statistics and beyond

How should one use (quasi-)experimental evidence when choosing policies such as tax rates, health insurance copay, unemployment benefit levels, and class sizes in schools? This paper suggests an approach based on maximizing posterior expected social welfare, combining insights from (i) optimal policy theory as developed in the field of public finance, and (ii) machine learning using Gaussian process priors. We provide explicit formulas for posterior expected social welfare and optimal policies in a wide class of policy problems.The proposed methods are applied to the choice of coinsurance rates in health insurance, using data from the RAND health insurance experiment. The key trade-off in this setting is between transfers toward the sick and insurance costs. The key empirical relationship the policy maker needs to learn about is the response of health care expenditures to coinsurance rates. Holding the economic model and distributive preferences constant, we obtain much smaller point estimates of the optimal coinsurance rate (18% vs. 50%) when applying our estimation method instead of the conventional “sufficient statistic” approach.

Drifting into Labour Market Insecurity? Labour Market Reforms in Europe after 2010

This working paper examines the impact of fiscal austerity on EU labour market policies. Using a case study approach, it examines: the extent of change in unemployment benefit levels and policies; the effect of this on groups of workers; and whether the logic of activation policies has shifted. Overall, the broad direction of policy has not altered greatly under austerity. However, risks remain that an underlying move towards greater flexibility may lock in ‘low road’ growth strategies that will make it harder to bring down debt and unemployment in future. By providing a detailed map of developments in labour markets after 2010 in 11 country case studies, the working paper tackles broad questions of welfare state change under conditions of austerity. It finds that, rather than following strategies of either retrenchment or expansion in welfare systems, the countries under examination have combined several elements in what can therefore be termed ‘mixed’ reform programmes. As a result, divergence across and within labour market regimes are much in evidence. Overall, however, the reforms amount to a move towards more flexibility and activation, and less security and protection. The paper also notes that, while labour market policies remain a national competence, the indirect pressure for reform from the EU has increased substantially.

The redistributive role of unemployment benefits

This paper evaluates the role of unemployment benefits as a tool for redistribution. In a setting with worker heterogeneity, the provision of unemployment benefits achieves two goals: it provides insurance to workers in the event of job loss and it redistributes wealth from individuals with more to those with fewer economic opportunities. Our model features a frictional labour market and an incomplete financial market. When calibrated to match stylised facts of the US economy, the optimal level of unemployment benefits is broadly similar regardless of whether workers differ in economic opportunities. This suggests that taking into consideration the redistributive nature of unemployment benefits has only a limited role in altering the optimal level of unemployment benefits.

Is There Always a Trade-Off between Insurance and Incentives? The Case of Unemployment with Subsistence Constraints

This article analyzes the behavioral effects of unemployment benefits (UB) and it characterizes their optimal level when jobless people only survive if they have access to a minimum or subsistence consumption level in each period. To survive when the level of UB is very low, they carry out a subsistence activity. Our model shows that if the level of UB is very low, increasing its level or providing liquidity to the agent can decrease the duration in unemployment; for higher levels of UB we reencounter the standard properties that increasing UB increases duration and that providing liquidity to the agent increases duration (Chetty, 2008). We also show that the optimal level of UB satisfies the Baily-Chetty formula (Baily, 1978, Chetty, 2006), but contrary to Chetty (2008), in our model the gain from insurance cannot be rewritten using sufficient statistics; we show that such decomposition requires specific modeling assumptions.

Optimal unemployment benefits in the presence of informal labor markets

We assess optimal unemployment benefit level and duration in a labor market with many informal jobs. Using administrative data from Argentina, a country with high informality, we exploit discontinuities in duration, and a reform that increases benefits. We find that increasing benefits hardly extends unemployment spells but raises re-employment wages. In contrast, extending unemployment benefits prolongs unemployment spells with no effect on re-employment wages. In a search model, we derive sufficient statistics to analyze the welfare effects of a reform that increases benefits by shortening duration. Calibrating our formula using our empirical results, we find that welfare would increase with higher benefits and shorter duration.

The Simple Analytics of Job Displacement Insurance

Job displacement in the U.S. is a serious threat to the earnings of long-tenured workers, through both (i) unemployment spells and (ii) reduced reemployment wages. Although full insurance requires both unemployment benefits and wage insurance, supply difficulties limit actual-loss insurance, and separation packages typically include partial unemployment insurance and scheduled (fixed sum) severance pay. The design of this two dimensional package requires a systems approach as well as a generalized replacement ratio measure of adequacy). Job search moral hazard and layoff moral hazard (firing costs), individually and in combination, introduce potentially serious contracting concerns. Economic theory provides a practical guide to the integration of these insurance instruments in this complex planning environment. One important implication: given the structure of earnings losses at displacement in the U.S., severance pay should increase with length of service in the firm (tenure), which is common, and unemployment insurance benefit levels should fall, which is not.

Can 'Happiness Data' Help Evaluate Economic Policies?

Imagine a government confronted with a controversial policy question, like whether it should cut the level of unemployment benefits. Will social welfare rise as a result? Will some groups be winners and other groups be losers? Will the welfare gap between the employed and unemployed increase? “Happiness data” offer a new way to make these kinds of evaluations. These data allow us to track the well-being of the whole population, and also sub-groups like the employed and unemployed people, and correlate the results with relevant policy changes.

Social Program Substitution and Optimal Policy

The large size and rate of growth of the US Disability Insurance (DI) system makes it important to understand the factors that influence the decision to apply for DI. In a context of imperfect DI screening, the generosity of other social programs can play a role in this decision, and one empirically relevant factor is the availability and generosity of Unemployment Insurance (UI) benefits. UI's impact on DI applications and enrollment has been ignored in welfare analyses of UI, but I show that it leads to significantly altered results: the optimal level of unemployment benefits increases by about 50%, as more generous UI prevents workers from applying for DI, with significant cost savings to the government. The same logic applies to a wide variety of other social programs and contexts, and in a more general model I show that the impact of any such program on welfare can be expressed in terms of its redistributional effect and its effects on the tax base and on enrollment on other programs.

Social program substitution and optimal policy

The large size and rate of growth of the US Disability Insurance (DI) system makes it important to understand the factors that influence the decision to apply for DI. In a context of imperfect DI screening, the generosity of other social programs can play a role in this decision, and one empirically relevant factor is the availability and generosity of Unemployment Insurance (UI) benefits. UI's impact on DI applications and enrollment has been ignored in welfare analyses of UI, but I show that it leads to significantly altered results: the optimal level of unemployment benefits increases by about 50%, as more generous UI prevents workers from applying for DI, with significant cost savings to the government. The same logic applies to a wide variety of other social programs and contexts, and in a more general model I show that the impact of any such program on welfare can be expressed in terms of its redistributional effect and its effects on the tax base and on enrollment on other programs.

Optimal labor market policy with search frictions and risk-averse workers

This paper characterizes the optimal policy within a dynamic search model of the labor market with risk-averse workers. In a first-best allocation of resources, unemployment benefits should provide perfect insurance against the unemployment risk, layoff taxes are necessary to induce employers to internalize the social cost of dismissing an employee but should not be too high in order to allow a desirable reallocation of workers from low to high productivity jobs, hiring subsidies are needed to partially offset the adverse impact of layoff taxes on job creation, and both unemployment benefits and hiring subsidies should be almost exclusively financed from layoff taxes. I obtain an optimal rate of unemployment which is, in general, different from the output maximizing rate of unemployment. When workers have some bargaining power, which prevents the provision of full insurance, it is optimal to reduce the rate of job creation below the output maximizing level in order to lower wages and increase the level of unemployment benefits. Thus, layoff taxes should typically exceed hiring subsidies which generates enough surplus to finance at least some of the unemployment benefits. The inclusion of moral hazard does not change this conclusion, unless workers have low bargaining power.

Szegénység, projektek, közpolitikák

Az utóbbi években hazai és nemzetközi kutatások, jelentések sora hívja fel a figyelmet a mélyülő szegénységre, erősödő társadalmi és területi polarizációra Magyarországon. Kétségtelen, hogy e kedvezőtlen tendenciákban a válság hatásai is tetten érhetők, tanulmányomban mégis amellett kívánok érvelni, hogy az állam által végrehajtott „jóléti fordulat” perdöntő szerepet játszik a szegénységet, kirekesztettséget, egyenlőtlenségeket tápláló struktúrák, folyamatok tartósságában, fennmaradásában. Uniós tagállamként Magyarország is célul tűzte ki a szegénység és kirekesztettség mérséklését szolgáló politikák céljainak, eszközeinek átvételét, gyakorlatba ültetését. A 2013 tavaszán és nyarán tizenegy kistérségben végzett empirikus kutatásunk alapvető kérdése az volt, hogy vajon a szegénység mérséklését szolgáló, elsősorban uniós forrásokból megvalósuló projektek, programok alkalmasak-e arra, s ha igen, milyen mértékben, milyen feltételek mellett, hogy mérsékeljék a szegénység, a társadalmi kirekesztettség újratermelődésének esélyét. A szegénységet fenntartó struktúrák és folyamatok azonosítása mellett e projektek értékelésére is megkértük interjúpartnereinket. A vizsgált vidéki térségekben általános és más kutatási tapasztalatokkal egybecsengő meggyőződés, hogy a generációkon átívelően újratermelődő szegénység olyan összetett problémahalmazt jelent, amely egy-egy projekt időtartama alatt és projektszemlélettel nem oldható meg. A kedvezőtlen tendenciák megfordításához a projektek és az intézményi struktúrák, tágabban a szegénységben élők helyzetét, perspektíváit meghatározó közpolitikák céljainak, eszközrendszerének összhangja elengedhetetlen. E tekintetben Magyarországon súlyos deficitekről beszélhetünk. Az elmúlt évek közpolitikai változásai a szegénység mérséklését szolgáló projektek, programok célkitűzéseinek ellenében a szegénység és kirekesztettség mélyüléséhez vezetnek. Mivel a kormányzat a szegénység mérséklésének és kezelésének jószerivel kizárólagos eszközévé a közfoglalkoztatást tette, tanulmányunkban e program elemzésére fókuszálunk, bemutatva piactorzító, és a szegénységben élőket a munkanélküliség csapdájában, tartós függőségben, kiszolgáltatottságban tartó hatásait.