The relationship between unemployment benefits and re-employment probabilities:: Evidence from Spain

We provide the first Spanish evidence about the effects on re-employment probabilities of variations in benefit levels and time-to-exhaustion. Increases in unemployment insurance (UI) benefit levels had a small disincentive effect on the re-employment hazard on average. Around this average, there were larger disincentive effects for men with elapsed durations between 4 and 18 months, whereas for men unemployed longer than 18 months, or for men resident in the south, the effect was negligible. Re-employment hazards increased when UI exhaustion was imminent, but the change was small. Extensions to unemployment assistance eligibility in 1989 for men aged 45+ years lowered re-employment probabilities.