The impact of unemployment insurance benefits on job finding in Spain

This paper provides new evidence of the impact of receiving contributive unemployment benefits on the exit rates to a job using an administrative database that includes the whole registered unemployed population in Spain. We estimate the causal impact of receiving unemployment benefits on job finding using a treatment effect framework. The analysis is carried out in five different exercises, which are designed to reduce the unobserved heterogeneity among the treatment (those who receive unemployment benefits) and control groups (those who don’t). Our results show that receiving unemployment benefits delays the exit to a job: there is a decrease of between 2.6 and 8.6 percentage points in the probability of finding a job for those who receive unemployment benefit over those who don’t. We also find evidence of the existance of an exhaustion effect, i.e., the job finding rates accelerate when people exhaust their benefits. Our empirical exercises also denote the importance of properly specifying the treatment and control groups to account for unobserved heterogeneity.