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The Gains of Unemployment Insurance to Job Match Quality in the Portuguese Labor Market

  • Economics


he Gains of Unemployment Insurance to Job Match Quality in the Portuguese Labor Market THE GAINS OF UNEMPLOYMENT INSURANCE TO JOB MATCH QUALITY IN THE PORTUGUESE LABOR MARKET* Mário Centeno** Álvaro A. Novo** 1. INTRODUCTION The job search ef fort of the un em ployed is one of the most im por tant in vest ments in the la bor mar ket. The ef fi ciency of this ac tiv ity is cru cial to the suc cess of the un em ployed, not only in terms of the like li - hood of re turn ing to work, but also in terms of wage pro gres sion. As in all in vest ments, there are costs in volved. The more im por tant of these costs in job search are (i) the op por tu nity cost in terms of fore - gone wages and (ii) the ou t-o f-pocket ex penses while un em ployed. The un em ploy ment in sur ance sys - tem was de signed to smooth tran si tions be tween em ploy ment and un em ploy ment, and back to em ploy ment; it par tially sup ports the un em ployed’s con sump tion and wel fare. It is a cru cial component of the social safety net of a modern economy. In this pa per, we in ves ti gate the abil ity of the un em ploy ment in sur ance (UI) sys tem to al low the un em - ployed to search not only for a job, but for the right job. If the un em ployed are given enough time to search, they may end up with a better search out come: a higher pay ing job and/or a job that lasts lon - ger. Ex plor ing two ex cep tion ally rich iden ti fi ca tion strat e gies avail able in the Por tu guese la bor mar ket, we in fe r the causal ef fect of lon ger UI en ti tle ment pe ri ods on reemployment wages. The meth od ol o - gies used pro vide a counterfactual es ti mate of the reemployment wages. In other words, we es ti mate the wage gains rel a tively to the sit u a tion with shorter un em ploy ment in sur ance cov er age. The ev i - dence pre sented in this ar ti cle is based on So cial Se cu rity ad min is tra tive re cords cov er ing all sub si - dized un em ploy ment spells initiated between January 1998 and December 200

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