Ž .
Carling et al. 1996 one cannot be quite certain that even reducing the period to 60 weeks would give clear effects.
In addition to the exhaustion effects, the prospect of benefit cuts should lead to increased search efforts in the entire unemployment period of the first sample
compared to the second one. This form of disincentive effect from the abolition of fixed benefit durations appears to be present in our material. For nearly the whole
first year of the search period the hazard to employment for UB receivers is significantly lower for the 1991 compared to the 1990 sample, while there is no
such effect for non-receivers. In conclusion, therefore, the incentive effect of a fixed benefits period is not rejected by this analysis.
5. Concluding remarks
We have investigated the potential incentive effect of a fixed unemployment insurance period by comparing two large groups of Norwegian unemployed
persons, where the last was affected by a rule change that in practice extended the benefits to more than 3 years. The main body of the analysis was performed within
the framework of a proportional hazard model with a flexible baseline. Our results suggest that the main effect of benefits running out is to make people drop out of
the unemployment register. There is no evidence that the hazard into employment increased when the end of benefits approached in the group that was not affected
by the liberalisation of compensation rules. Consequently, we cannot reject the null hypothesis that behaviour around benefits expiration was unaffected by the
change. Our results conform with some previous research, but not with US studies that find that benefits expiration significantly increases the exit rate into employ-
ment. One explanation may be the attractiveness of labour market programmes. Alternatively, the differences may be explained by the incentive effects being
outweighed by a reduced job offer probability because of the long benefit period. On the other hand, our results indicate that the reform appeared to have an all over
negative effect on the employment hazard. This suggests that fixed duration benefit periods do have positive incentive effects, even in cases where the periods
are as long as in Norway. Taken together with previous research, one may still argue in favour of the policy recommendation that the unemployment benefits
period should be fixed.
Acknowledgements
We would like to thank Anders Bjorklund, Josef Zweimuller, and Alf Erling
¨ ¨
Risa for useful comments and suggestions.
Appendix A. Table A1. Variable descriptions
Ž .
Income Gross income previous year 1989 NoK
Ž .
Spouse inc. Spouse’s gross income previous year 1989 NoK
Female Dummy variable s 1 if female
Education Years of education
Ž Experience1
Years with gross income 1‘‘G’’ regulated annually, .
NoK 32275 in 1989 Experience2
Dummy s 1 if record in employment register F 1 year previous to unemployment period
Married Dummy s 1 if married
Div.rwidow Dummy s 1 if previously married
Childr - 11 a children below 11 years
Childr 11 - 18 a children between 11 and 18 years
Non-Scand Non-Scandinavian citizenship
Age groups Set of 6 dummy variables, reference is 36-45 years
Ž Unemp
Local unemployment rate time-varying, updated each .
4-week period Ž
. Region 1
Base category Eastern Norway, including Oslo Region 2
Dummy s 1 if residing in Central Norway Region 3
Dummy s 1 if residing in WesternrSouthern Norway Region 4
Dummy s 1 if residing in Northern Norway UB-receiver
Dummy s 1 if receiving unemployment benefits UB-period
Set of five dummy variables indicating that UB-receiver s 1 and period s a, where a corresponds to weeks 69–72,
73–76, 77–80, 81–84, and 85–88, respectively. Month
Set of six dummy variables controlling for the month the Ž
. Ž spell started reference is June . Coefficients not
. reported.
Appendix B. Table A2. Individuals at risk, exits and censored, by period
Period 1990 sample
1991 sample At risk
Exits Censo-
At risk Exits
Censo- red
red 9936
308 12 054
262 1
9628 629
11 792 595
2 8999
513 68
11 197 489
52 3
8418 310
1390 10 656
356 1351
4 6718
240 734
8949 239
945 5
5744 218
496 7765
246 717
Appendix B. Table A2 continued .
Period 1990 sample
1991 sample At risk
Exits Censo-
At risk Exits
Censo- red
red 6
5030 174
296 6802
216 341
7 4560
167 268
6245 187
302 8
4125 126
247 5756
164 307
9 3752
119 211
5285 161
268 10
3422 126
170 4856
126 275
11 3126
112 171
4455 102
117 12
2843 62
78 4236
94 193
13 2703
63 175
3949 84
265 14
2465 69
127 3600
94 189
15 2269
48 127
3317 72
149 16
2094 48
88 3096
57 104
17 1958
43 90
2935 65
124 18
1825 34
75 2746
78 108
19 1716
33 76
2560 59
94 20
1607 34
50 2407
86 97
21 1523
34 59
2224 68
106 22
1430 34
88 2050
53 120
23 1308
28 74
1877 58
105 24
1206 15
27 1714
33 38
25 1164
17 104
1643 34
114 26
1043 19
75 1495
33 107
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