The effect of unemployment benefits on re-employment rates: Evidence from the Finnish UI-benefit reform

In January 2003, the unemployment benefits increased in Finland for workers with long employment histories. The average benefit increase was 15% for the first 150 days of unemployment spell. In this paper we evaluate the effect of benefit increase on the duration of unemployment by comparing the changes in the re-employment hazard profiles between the unemployed who became eligible to the increased benefits to a control group whose benefit structure remained unchanged. We find that benefit increase reduced re-employment hazards in the beginning of the unemployment spell but that the effect disappears after the period with increased benefits expires.

Published: 1.3.2007
ISBN: 978-952-209-040-9
ISSN: 1795-1801
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