Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/201461 
Year of Publication: 
2018
Series/Report no.: 
Working Paper No. 2018:23
Publisher: 
Institute for Evaluation of Labour Market and Education Policy (IFAU), Uppsala
Abstract: 
The well-known positive relationship between the unemployment benefit level and unemployment duration can be separated into two potential sources; a moral hazard effect, and a liquidity effect pertaining to the increased ability to smooth consumption. The latter is a socially optimal response due to credit and insurance market failures. These two effects are difficult to separate empirically, but the social optimality of an unemployment insurance policy can be evaluated by studying the effect of a non-distortionary lump-sum severance grant on unemployment durations. In this study, I evaluate the effects on unemployment duration and subsequent job quality of a lump-sum severance grant provided to displaced workers, by means of a Swedish collective agreement. I use a regression discontinuity design, based on the strict age requirement to be eligible for the grant. I find that the lump-sum grant has a positive effect on the probability of becoming unemployed and the length of the completed unemployment duration, but no effect on subsequent job quality. My analysis also indicates that spousal income is important for the consumption smoothing abilities of displaced workers, and that the grant may have a greater effect in times of more favorable labor market conditions.
Subjects: 
Employment security agreements
collective agreement
lump-sum severance grant
unemployment insurance
moral hazard
liquidity effect
regression discontinuity design
JEL: 
J59
J63
J65
Document Type: 
Working Paper

Files in This Item:
File
Size
552.04 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.