Potential benefit duration in multi-spell unemployment

Jan C. Van Ours2, Sander Tuit 1
1CentER, Department of Economics, Tilburg University, The Netherlands, 2CentER, Department of Economics, Tilburg University, University of Melbourne and CEPR, Australia

This paper studies how a reduction in potential benefit duration affects the
job finding rate of unemployed workers in The Netherlands. Until August 2003, workers that exhausted their unemployment benefits would receive extended benefit instead of having to apply for welfare benefits. A sudden legislation change removed the right to extended benefits for workers becoming unemployed directly after this legislation change. We use duration models to estimate the effect of the abolishment of extended benefits on the benefit outflow rates. Furthermore, we exploit the fact that workers with multiple unemployment spells have rights to extended benefits if the start of their first unemployment spell was before the legislation change, making the legislation change a natural experiment for the multi-spell unemployed. For both men and women, there seems to be an increase in the job finding rate after August 2003. For the youngest group we consider the reduction has the largest positive effects on the job finding rate.

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