Market Externalities of Large Unemployment Insurance Extension Programs
American Economic Review
vol. 105,
no. 12, December 2015
(pp. 3564-96)
Abstract
We provide evidence that unemployment insurance affects equilibrium conditions in the labor market, which creates significant "market externalities." We provide a framework for identification of such equilibrium effects and implement it using the Regional Extension Benefit Program (REBP) in Austria which extended the duration of UI benefits for a large group of eligible workers in selected regions of Austria. We show that non-eligible workers in REBP regions have higher job finding rates, lower unemployment durations, and a lower risk of long-term unemployment. We discuss the implications of our results for optimal UI policy. (JEL E24, J64, J65, R23)Citation
Lalive, Rafael, Camille Landais, and Josef Zweimüller. 2015. "Market Externalities of Large Unemployment Insurance Extension Programs." American Economic Review, 105 (12): 3564-96. DOI: 10.1257/aer.20131273Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- J64 Unemployment: Models, Duration, Incidence, and Job Search
- J65 Unemployment Insurance; Severance Pay; Plant Closings
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics