Unemployment Insurance and Job Turnover in Spain

Abstract

The aim of this paper is to shed some light on the potential relationships between the unemployment insurance system and labour market turnover, seeking to further the traditional view that this system has only behavioural consequences for the labour supply side of the labour market. This study assumes the incentives embedded in the unemployment insurance system have a heterogeneous impact, depending on the type of labour market transition (quits versus layoffs and recalls versus new job entrances) and on a worker’s attachment to the labour market (gender and type of contract). The layoff hazard rate increases as workers qualify for unemployment benefits, while the quit hazard rate remains stable. Similarly, employment inflow increases sharply after the exhaustion of unemployment benefits. The timing and importance of the exit differs between recalls and new job entry and depends on a worker’s attachment to the labour market. The results show that unemployment benefits appear to favour job turnover and both firms’ and workers´ decisions seem to matter.Unemployment Insurance, Job Turnover, Multivariate Mix Proportional Hazard Models, Recall and Layoffs, Employment and Unemployment Duration