Seminar ONSDAG den 21. august 2013

Estimating the Latent Effect of Unemployment Benefits on Unemployment Duration

Abstract

This paper estimates the effect of a cut in unemployment benefit entitlements on unemployment duration. It goes beyond the current state of the literature by applying a recently developed copula graphic regression estimator and by distinguishing between five dependent competing risks. Since the competing risks model is not identified, we determine bounds for reform effects on transitions into different destination states. We find evidence for faster job taking times of unemployed with higher pre-unemployment salaries. We also find potentially large effects of the reform on transition times into less desirable labor market states, where individuals are entitled to other benefits or subsidies (e.g. self-employment, training), or to inactivity.

Keywords: dependent competing risks, partial identification, difference-in-differences

JEL: C34, C41, J64

Contact: Peter Møllgaard