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Britto, Diogo
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Working Paper 48
Can unemployment insurance (UI) affect the behavior of employed workers and the duration of their employment spells? I apply a regression kink design to address this question using data from the Brazilian labor market. Exploiting the UI schedule, I find that a 1% higher potential benefit level increases job duration by around 0.35%. This result is driven by the fact that a higher potential benefit level reduces the probability of job quits, which are not covered by UI. I develop a simple model showing that the positive effect on employment duration implies that the optimal benefit is higher than otherwise and delivers a simple welfare formula based on sufficient statistics. A simple calibration exercise shows that this elasticity affects welfare with a similar magnitude as the well-known elasticity of unemployment duration to the benefit level.
Unemployment Insurance
Employment Duration
Regression Kink Design
Sufficient Statistics Welfare Analysis
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Working Paper

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