Unemployment Insurance in Welfare States: Soft Constraints and Mild Sanctions

Published in

Strategic Institute Program, Frisch Centre for Economic Research

Abstract

Based on a sequence of reforms in the Norwegian unemployment insurance (UI) system, we show that soft duration constraints and mild sanction practices significantly increase UI claimants’ job hazard rates. Soft duration constraints appear to have almost the same behavioral impacts as hard constraints. In particular, the spikes at benefit exhaustion are of similar magnitude, irrespective of the kind of services and benefits that are offered after exhaustion, e.g., in terms of follow-on benefits and access to paid labor market programs. We find that extensive use of activity requirements backed up by mild sanctions effectively speed up the job search process and cut unemployment duration.

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By Knut Røed and Lars Westlie
Published Mar. 23, 2015 11:20 AM - Last modified Nov. 20, 2017 3:23 PM