How does the increased unemployment insurance affect job search, reallocation and integration?

Research problem and specific questionsDespite a long-standing literature on the relationship between Unemployment Insurance (UI) design and unemployment length, there is still comparatively little done to understand the wider impact of UI benefit generosity in terms of qualifying conditions and payment levels.

This implies that policy-makers and public agencies are forced to make decisions in a vacuum where it is difficult to assess how exactly UI design is affecting society in general and groups with a high risk of unemployment more in particular.

The project aims to fill this gap by answering the following research questions: To what extent do UI benefits affect intensity and direction of job search? Do higher benefits increase reallocation, i.e. the flow of workers between jobs and firms? And how does UI generosity affect the search behavior and reallocation of newly arrived immigrants in particular?

Data and methodCausally estimating the effect of UI design parameters (e.g., benefit levels) on outcomes (e.g., search behavior) is challenging because both dependent and independent variables are affected by the same unobservable characteristics.

To overcome this endogeneity problem, we use Swedish register data and apply state-of-the-art methods to an array of policy discontinuities and its changes implemented between March and June 2020.

These include changes to floor and ceiling of income-related UI and those pertaining to minimum membership rules for eligibility of income-related UI.Societal relevance and utilizationThe policy changes to UI in Sweden during 2020 and the decision to make parts of these permanent in 2022 have been among the most drastic and intensely debated changes to Swedish UI of the last two decades.

We contribute to the public discourse and policy-making in this contest by investigating how these changes affected job seekers’ search behavior and reallocation.

In addition we zoom in on the impact that the changes had on the labor market integration of newly arrived immigrants, a group with a particularly high unemployment risk. Plan for project realizationThis project builds on using available register data that will be accessed through SCB.

The project brings together researchers from economics and political science who all have extensive experience with the proposed methods and data.

The majority of the budget concerns wage costs for the core project members as well as costs for data access, traveling, and publishing fees.