Market Externalities of Large Unemployment Insurance Extension Programs
Rafael Lalive, Camille Landais, Josef Zweimüller
American Economic Review · 2015 · Volume 105 · Issue 12
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)
Keywords
Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Aggregate Labor Productivity, Unemployment: Models, Duration, Incidence, and Job Search, Unemployment Insurance, Severance Pay, Plant Closings, Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration, Regional Labor Markets, Population, Neighborhood Characteristics
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