Timed to Say Goodbye: Does Unemployment Benefit Eligibility Affect Worker Layoffs?

Luxembourg Institute of Socio-Economic Research (LISER) Working Paper Series 2019-04

56 Pages Posted: 12 Jun 2019

See all articles by Andrea Albanese

Andrea Albanese

Luxembourg Institute of Socio-Economic Research (LISER); Ghent University; IZA Institute of Labor Economics

Corinna Ghirelli

Bank of Spain

Matteo Picchio

Polytechnic University of Marche

Multiple version iconThere are 2 versions of this paper

Date Written: March 18, 2019

Abstract

We study how unemployment benefit eligibility affects the layoff exit rate by exploiting quasi-experimental variation in eligibility rules in Italy. By using a difference-in-differences estimator, we find an instantaneous increase of about 12% in the layoff probability when unemployment benefit eligibility is attained, which persists for about 16 weeks. These findings are robust to different identifying assumptions and are mostly driven by jobs started after the onset of the Great Recession, in the South and for small firms. We argue that the moral hazard from the employer's side is the main force driving these layoffs.

Keywords: unemployment insurance, layoffs, employer-employee moral hazard, difference-in-differences, heterogeneous effects

JEL Classification: C31, C41, J21, J63, J65

Suggested Citation

Albanese, Andrea and Ghirelli, Corinna and Picchio, Matteo, Timed to Say Goodbye: Does Unemployment Benefit Eligibility Affect Worker Layoffs? (March 18, 2019). Luxembourg Institute of Socio-Economic Research (LISER) Working Paper Series 2019-04, Available at SSRN: https://ssrn.com/abstract=3394718 or http://dx.doi.org/10.2139/ssrn.3394718

Andrea Albanese (Contact Author)

Luxembourg Institute of Socio-Economic Research (LISER)

11 Porte des Sciences
Esch-sur-Alzette, L-4366
Luxembourg

Ghent University ( email )

Ghent, B-9000
Belgium

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Corinna Ghirelli

Bank of Spain ( email )

Calle Alcala, 48
Madrid, 28014
Spain

Matteo Picchio

Polytechnic University of Marche ( email )

Piazzale Martelli 8
Ancona, 60121
Italy

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