American Economic Review Vol. 105 No. 12 2015

Market Externalities of Large Unemployment Insurance Extension Programs

Rafael Lalive¹; Camille Landais²; Josef Zweimüller³

¹ Department of Economics, University of Lausanne, CH-1015 Lausanne-Dorigny, and CEPR, CESifo, IFAU, IZA, IfW, and University of Zurich (e-mail: ) · ² Department of Economics, London School of Economics, Houghton Street, London, WC2A 2AE (e-mail: ) · ³ Department of Economics, University of Zurich, Schönberggasse 1, CH-8001 Zurich, and CEPR, CESifo, and IZA (e-mail: )

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.

DOI

10.1257/aer.20131273

Volume

105

Issue

12

Pages

3564-3596

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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