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Research ArticleArticle

When the Going Gets Tough…

Financial Incentives, Duration of Unemployment, and Job-Match Quality

Yolanda F. Rebollo-Sanz and Núria Rodríguez-Planas
Journal of Human Resources, January 2020, 55 (1) 119-163; DOI: https://doi.org/10.3368/jhr.55.1.1015.7420R2
Yolanda F. Rebollo-Sanz
Yolanda F. Rebollo-Sanz is Associate Professor at the Department of Economics, Quantitative Methods and Economic History, Universidad Pablo de Olavide, Sevilla, Spain (). Núria Rodríguez-Planas is Professor of Economics at Queens College, City University of New York ().
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Núria Rodríguez-Planas
Yolanda F. Rebollo-Sanz is Associate Professor at the Department of Economics, Quantitative Methods and Economic History, Universidad Pablo de Olavide, Sevilla, Spain (). Núria Rodríguez-Planas is Professor of Economics at Queens College, City University of New York ().
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Abstract

In the aftermath of the Great Recession, the Spanish government reduced the replacement rate (RR) from 60 percent to 50 percent after 180 days of unemployment for all spells beginning on or after July 15, 2012. Using Social Security data and a differences-in-differences approach, we find that reducing the RR by ten percentage points (or 17 percent) increases workers’ odds of finding a job by 41 percent relative to similar workers not affected by the reform. To put it differently, the reform reduced the mean expected unemployment duration by 5.7 weeks (or 14 percent), implying an elasticity of 0.86. A regression discontinuity approach indicates that the reform increased the job-finding rate by 26 percent. We find strong behavioral effects as the reform reduced the expected unemployment duration right from the beginning of the unemployment spell. While the reform had no effect on wages, it did not decrease other measures of post-displacement job-match quality. After 15 months, the reform decreased unemployment insurance expenditures by 16 percent, about one-half of which are explained by job seekers’ behavioral changes.

JEL Classification
  • J64
  • J65
  • J68
  • Received October 2015.
  • Accepted April 2018.
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Journal of Human Resources: 55 (1)
Journal of Human Resources
Vol. 55, Issue 1
1 Jan 2020
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When the Going Gets Tough…
Yolanda F. Rebollo-Sanz, Núria Rodríguez-Planas
Journal of Human Resources Jan 2020, 55 (1) 119-163; DOI: 10.3368/jhr.55.1.1015.7420R2

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When the Going Gets Tough…
Yolanda F. Rebollo-Sanz, Núria Rodríguez-Planas
Journal of Human Resources Jan 2020, 55 (1) 119-163; DOI: 10.3368/jhr.55.1.1015.7420R2
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  • Article
    • Abstract
    • I. Introduction
    • II. Empirical Literature Review on the Effects of Changing Unemployment Insurance Benefit Levels
    • III. The Spanish Unemployment Insurance Benefit System
    • IV. The DiD Empirical Strategy and Theoretical Predictions
    • V. The Data and Descriptive Statistics
    • VI. Results
    • VII. Conclusion
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Keywords

  • J64
  • J65
  • J68
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