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Market externalities of large unemployment insurance extension programs

Lalive, Rafael, Landais, Camille and Zweimüller, Josef (2015) Market externalities of large unemployment insurance extension programs. American Economic Review, 105 (12). pp. 3564-3596. ISSN 0002-8282

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Identification Number: 10.1257/aer.20131273


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 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.

Item Type: Article
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Additional Information: © 2015 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
JEL classification: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
Date Deposited: 01 Dec 2015 16:55
Last Modified: 20 Oct 2021 02:18

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