Identifying Unemployment Insurance Income Effects with a Quasi-Natural Experiment

This paper acknowledges that UI has a non-distortionary income effect generated by easing the liquidity constraints of the unemployed. Using an exogenous increase in the entitlement period as a quasi-experimental setting, we find evidence of an important income effect. The extension of the entitlement period prolongs unemployment spells, but its effect is decreasing with the degree of liquidity constraints (indexed by wages quintiles). An exception to this pattern is the behavior of individuals in the first wages quintile. The fact that the most constrained individuals extend the least their unemployment spells conforms to the nonstationarity of the job search process. This result points to the possibility that the UI system may become regressive, benefiting significantly less those at the bottom of the wage distribution, who find it harder to benefit from extended UI entitlements.

The Impact of Unemployment Insurance Generosity on Match Quality Distribution

This paper investigates the impact of unemployment insurance (UI) generosity on the distribution of match tenure. We show that more generous UI increases expected tenure, reducing the mass of the lower tail of match duration and increasing the duration of matches available. This impact is differentiated across education levels, with the larger benefits accruing to the less educated.

Uncertainty And Risk Analysis Of Macroeconomic Forecasts: Fan Charts Revisited

Since 1996 the Bank of England (BoE) has been publishing estimates of probability distribution of the future outcomes of inflation and output growth. These density forecasts, known as "fan charts", became very popular with other central banks (e.g. Riskbank) as a tool to quantify uncertainties and risks of conditional point forecasts. The BoE's procedure is mainly a methodology to determine the distribution of a linear combination of independent random variables. In this article we propose an alternative methodology that addresses two issues with the BoE procedure that may affect the estimation of the densities. The first issue relates to a statistical shortcut taken by the BoE that implicitly considers that the mode of the linear combination of random variables is the (same) linear combination of the modes of those variables. The second issue deals with the assumption of independence, which may be restrictive. An illustration of the new methodology is presented and its results compared with the BoE approach.

Evaluating Job Search Programs for Old and Young Individuals: Heterogeneous Impact on Unemployment Duration

This paper exploits an area-based pilot experiment to identify average treatment effects on unemployment duration of treated individuals of two active labor market programs implemented in Portugal. We focus on the short-term heterogeneous impact on two subpopulations of unemployed individuals: young (targeted by the Inserjovem program) and old (targeted by the Reage program). We show that the latter program has a small and positive impact (reduction) on unemployment duration of workers finding a job upon participation, whereas the impact of Inserjovem is generally negative (extended durations). These results are robust to a wide variety of constructions of quasi-experimental settings and estimators. The identification of heterogeneous effects showed that the program results were less satisfactory for young workers, for those over 40 and for the less educated. Women also benefited less from the programs. The results seem to improve slightly for young workers in the 2nd semester of implementation, but they deteriorate in the medium term. The lack of wage subsidies in the Portuguese programs may explain the minor impacts obtained, when compared to similar programs

Institutions and Economic Development: How Strong is the Relation?

This paper investigates the relationship between institutions and economic development (output per worker). As in Hall and Jones (1999), we find that a 1% improvement in institutions (as we measure them) generates on average a 5% increase in output per worker. However, this relationship is not linear and the data have important heterogeneity. Countries with the same value of institutions have different levels of income per worker. We ask whether the "returns to institutions" are the same across countries conditional on the level of institutions. Using quantile regression methods, we show that for countries at the top of the conditional distribution of international incomes, the "returns to institutions" are lower (around 3.8%), than for countries at the bottom of this distribution (around 6.2%). We show that this result is robust for different model specifications and definitions of institutions. We also provide evidence that, conditional on the level of institutional development, the distribution of output per worker tends to become less disperse as countries improve their institutional framework. In other words, better institutions are fundamental to close the output per worker gap across countries. Finally, we provide the rationale behind the results through a modified version of a Neoclassical Growth Model with time varying wedges, representing policy distortions and institutions.