The Potential Duration of Unemployment Benefits and the Duration of Unemployment

Western European countries with relatively generous unemployment insurance (UI) systems (such as Belgium, France, Germany, the Netherlands, and the UK) have suffered much larger and more persistent increases in unemployment in the 1980s than has the USA. These differences in West European and US unemployment experience are largely explained by the substantially longer duration of unemployment spells in Europe. Furthermore, much microeconomic evidence indicates that there is a positive relation between the level of UI benefits received and the duration of the unemployment spells of UI recipients. 2 These observations have generated much interest among both academics (for example, Minford, 1985) and the press (for example The Economist , 14–20 May 1988, p. 69) in the hypothesis that work disincentives arising from generous unemployment insurance (UI) systems have played an important role in high and persistent European unemployment in the 1980s. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.