IPP Policy Brief n°5 - April 2013

The effect of the generosity of unemployment insurance

illustration-note5-IPPIPP Policy Brief n°5

April 2013

Author: Thomas le Barbanchon

logo-pdf-min-2The effect of the generosity of unemployment insurance on unemployment duration and match quality

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Summary:

The main purpose of unemployment insurance is to ensure income replacement for those involuntarily deprived of employment. While the policy meets this aim, there are questions about its effectiveness in other aspects. In theory, generous unemployment benefits slow re-entry into the workforce but are also likely to improve the quality of employment found. This study is an empirical assessment of the impact of the extension of the maximum period of unemployment benefits in France between 2000 and 2002. When the benefits limit was extended from seven to fifteen months, the rate of return to work decreased by 28 per cent (representing an increase in the duration of unemployment by around two and half months), while the stability of work found and wages paid did not noticeably improve.

Key points:

  • When the period of unemployment benefits was increased from seven to fifteen months, the period of unemployment increased by about two and a half months.
  • This increase in the length of unemployment was not accompanied by an improvement in match quality of new employment found.

 

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