UNEMPLOYMENT BENEFITS IN A PERIOD OF CRISIS: THE EFFECT ON UNEMPLOYMENT DURATION

The current study shows that the disincentive effects of unemployment benefits exist even during a period of deep recession. The study uses recent data for unemployment benefit recipients in Estonia – a country where the rise in unemployment during the global financial crisis was the highest in the entire European Union. Both a higher benefit level and a longer maximum duration of benefits decrease exits from unemployment to employment. Yet, compared to the pre-crisis period, the effects of unemployment benefits are slightly milder and more homogenous. In addition, unemployed people directed to active measures tend to exhibit a lower hazard of leaving unemployment just before the period of an active measure and during the period of receiving an active measure.