Seminar by Vincenzo Scrutinio

SALA SEMINARI – 1° PIANO, PALAZZO LEVI CASES, VIA DEL SANTO 33 - ORE 12.30

22.01.2019

Seminar by Vincenzo Scrutinio, London School of Economics

Title: "The Medium-Term Effects of Unemployment Benefits" -Job Market Paper-

Abstract: Although there is an extensive literature on the short-term effects of unemployment benefits, little is known about their medium-term implications. In this paper I use rich and novel administrative data to study the effects of potential benefit duration on aggregate outcomes over 4 years after layoff. I implement a regression discontinuity design exploiting a discontinuous 4 months jump in potential benefit duration at 50 years of age-at-layoff. I find that longer potential benefit duration leads to a longer period on unemployment benefits and in not employment, by 8 weeks and 6.2 weeks respectively. I also find positive, but small and often not significant, effects on first job quality with a small increase in the probability of finding a permanent contract. In the medium run, however, workers with longer potential benefit duration spend only 2 additional weeks in not employment and show small labor income losses. This is driven by a higher employment probability in the period following the first reemployment, which compensate for the longer time spent to find a job. Estimates are robust to a wide set of robustness checks and a placebo check further supports my identification strategy. Results suggest that workers coming from smaller firms and losing a permanent contract are the ones most negatively affected by longer potential benefit duration. These findings are important from a policy perspective as they suggest that classical measures of the cost of unemployment benefits tend to overestimate the negative externalities of potential benefit duration.