Effects of a higher replacement rate on unemployment durations, employment, and earnings

This paper discusses the effects of a higher unemployment benefit replacement rate on unemployment durations, employment, and earnings. A reform of unemployment insurance in Switzerland in July 2003 increased the replacement rate by up to 5.88 p.p. for individuals who earned between 3,536 and 4,340 CHF and have no children, while it did not change the replacement rate for all other unemployed persons. This allows to study the effects of a higher replacement rate adopting a difference-in-differences (DiD) approach. I find no statistically significant effect of an increase in the replacement rate on unemployment durations, employment, and earnings for Swiss men and migrants, but a statistically significant positive effect on unemployment durations for Swiss women.