Unemployment insurance entitlement rules and the wage effect of unemployment insurance reform

I study the impact of unemployment insurance (UI) entitlement on the wage effect of increasing the UI benefit rate. First, I show that a standard Mortensen-Pissarides model calibrated to Aus- tria can rationalise both large and small average wage effects depending on the rate at which UI recipients lose their entitlement while unemployed. Second, exploiting the progressive in- troduction of the 2001 Austrian UI reform, I find empirical support for the model-predicted difference in reemployment wages between the group of individuals who start a UI claim dur- ing the month leading up to the date of the policy change and the group of individuals who start a UI claim during the month following the date of the policy change. ∗I am indebted to Pierre Cahuc for the continuous support, encouragement, and useful pieces of advice. I thank Kerstin Holzheu for her very helpful comments and suggestions. I also thank Gustave Kenedi for his comments and suggestions. All remaining mistakes are mine. This project uses data from the Austrian Labor Market Database (https://arbeitsmarktdatenbank.at/) and ben- efited from generous financial support for data access from the Chaire Sécurisation des Parcours Professionnels (https://www.chaire-securisation.fr/) and Sciences Po Paris École de la Recherche. This project uses replication code for the paper by Jäger, Schoefer, Young, & Zweimüller (2020), which was in part developed with the contributions of Andreas Haller, Stefan Staubli, Andreas Steinhauer, Dominik Egloff, Johanna Posch, Martina Fink, Nelson Mesker among others. †PhD candidate in Economics, Department of Econonics, Sciences Po Paris