Unemployment Benefits for Labor Market Entrans

The study presented in this Mannheim Applied Seminar examines the impacts of unemployment benefit eligibility (UBE) for labor market entrants on time until first job, earnings, and medium-term job match quality. Unlike peers in most other countries, Danish and Finnish graduates are entitled to UB even if they have low previous earnings. The authors use the labor market performance of Norwegian graduates as a counterfactual and compare outcomes over the first 4 post-graduation years. To account for different labor markets in the two countries, they include fresh entrants into unemployment insurance with the same educational qualifications. Combined with administrative data for all graduates with masters’ degrees over the years 2015-2019, they use a difference-in-difference framework to estimate the impacts of UBE. The public transfer take-up is much higher with UBE. In line with predictions from standard search theory they find that UBE slows down entry into fulltime job significantly.