Unemployment, Skills, and Incentives : An Overview of the Safety Net System in the Slovak Republic
The author studies the potential disincentive effects of unemployment insurance, and social assistance payments on the duration of unemployment in the Slovak Republic. For this purpose, she uses new, very detailed data on receipt of benefits from t...
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Format: | Policy Research Working Paper |
Language: | English en_US |
Published: |
World Bank, Washington, DC
2013
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Subjects: | |
Online Access: | http://documents.worldbank.org/curated/en/2002/01/1687149/unemployment-skills-incentives-overview-safety-net-system-slovak-republic http://hdl.handle.net/10986/15750 |
Summary: | The author studies the potential
disincentive effects of unemployment insurance, and social
assistance payments on the duration of unemployment in the
Slovak Republic. For this purpose, she uses new, very
detailed data on receipt of benefits from the Unemployment
Registry (1990-2000) and the Labor Force Survey (1996, 1999,
and 2000). She employs a flexible methodology that makes it
possible to identify behavioral changes that may occur as
the quantity, and duration of the benefits change over time,
as well as behavioral differences between recipients, and
non-recipients. This approach, she argues, constitutes a
more accurate test for the presence of incentive, and
disincentive effects, than those presented before in the
literature. She expands the scope of her analysis, to study
the effect of receiving benefits on several outcomes in
addition to exit from unemployment (for example, job seeking
behavior, and duration of unemployment). She finds important
behavioral differences between those who receive benefits,
and those who do not. Recipients tend to spend more time
unemployed, but they also look for employment more actively
than their counterparts, have more demanding preferences
with respected to their future jobs, and find jobs in the
private sector more often. In addition, these jobs turn out
to be better matches than those obtained by non-recipients
(with the quality of the match measured by its duration).
Moreover, the behavior of recipients varies tremendously
depending on whether they are actually receiving benefits,
or not. Once their benefits are exhausted, they exit the
Unemployment Registry at a higher rate, search more
actively, and move into private sector jobs more often. So
when these workers are used as their own control group,
there is strong evidence that both unemployment insurance
and social assistance, or support have important
disincentive effects, not only on the duration of
unemployment, but also on job seeking behavior, and on exit
to employment. Analyzing the effect of unemployment
insurance, and social assistance on poverty, the author
concludes that these programs bear most of the burden in the
fight against poverty. But this protection does not come
free, since significant disincentive effects are associated
with receiving benefits. Thus any reform plan should take
into account both of these aspects of the programs, along
with the government's goals for the programs. |
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