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Can unemployment benefit cuts improve employment and earnings?

  • Lionel Cottier
  • Kathrin Degen
  • Rafael LaliveEmail author
Article
  • 43 Downloads

Abstract

We study how a reduction in potential benefit duration (PBD) affects employment and earnings of job seekers before and after unemployment benefits exhaust. Reducing PBD induces job seekers to become less selective and accept jobs earlier, which can worsen or improve labor market outcomes. We study a 2003 reform that reduces PBD from 24 to 18 months for job seekers younger than 55 years in Switzerland. Using older job seekers as a control group, we find that reducing PBD increases employment and earnings even after unemployment benefits have run out. Employment and earnings increase particularly strongly for job seekers who previously worked in industries with high R&D expenditures, industries where job seekers’ skills can depreciate rapidly.

Keywords

Potential benefit duration Unemployment duration Older workers Earnings and employment 

JEL Classification

J64 J65 J38 

Notes

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of LausanneLausanne-DorignySwitzerland
  2. 2.AMOSA Labor Market ObservatoryZürichSwitzerland

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