Can a search model predict the effects of an increase in the benefit duration? Evidence from the Portuguese unemployment insurance reform

Álvaro Novo, Andre C. Silva

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Abstract

We test the predictions of an equilibrium search model about the effects of an increase in the maximum duration of unemployment benefits. We use the 1999 unemployment insurance reform of Portugal, a quasi-natural experiment. The reform increased the maximum duration of benefits for three groups of agents and maintained all features of the unemployment insurance for two other groups. We isolate the effects of the increase in the maximum duration of benefits and test the model. The model successfully predicts the effects on the unemployment rate, the labor force participation, and the levels of unemployment and employment.
Original languageEnglish
Article number3
Number of pages14
JournalIZA Journal of Labor Policy
Volume6
Issue number1
DOIs
Publication statusPublished - Dec 2017

Keywords

  • Unemployment duration
  • Unemployment benefits
  • Equilibrium search
  • Labor market reforms
  • Quasi-natural experiment

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