How Changes in Benefits Entitlement Affect Jobfinding: Lessons from the Slovenian "Experiment"

Jan van Ours, Department of Economics, Tilburg University

In 1998 the Slovenian UI system was drastically reformed. The reform reduced the potential
duration of unemployment benefits substantially and simultaneously improved employment
services offered to, and monitoring of, the recipients. We find that the reduction in potential
benefit duration had a positive effect on the exit rate out of unemployment – both to
employment and to other destinations – at various durations of unemployment spells and for
many categories of unemployed workers. We also identify a clear spike in the exit rate out
of unemployment in the month unemployment benefits expire (and a smaller spike in the
month thereafter), and for males an increase of job-finding rate in the third month of
unemployment, a likely consequence of a reduction of the level of benefit that occurs at that
point. Interestingly, post-unemployment wages of recipients were not affected after the
change of the law, suggesting that higher job-finding rates following the reduction of
benefits were not produced by reduced reservation wages (higher acceptance probability)
but rather more effective job-search activity.

Date: 02 November-00 0000