Unemployment duration and the interactions between unemployment insurance and social assistance

Existing studies suggest that reforms that reduce the generosity of the unemployment benefits should lower unemployment. Despite the large number of such reforms implemented in Europe in the past decades, evidence from various data sources shows very little correlation with the evolution of unemployment. This paper suggests that the scant success of these labour market reforms can be explained by the interactions between unemployment insurance and other social assistance programmes. Evidence from the European Community Household Panel shows that recipients of unemployment insurance who are also eligible for other welfare schemes are indeed less sensitive to changes in the level and the duration of their benefits. D 2005 Elsevier B.V. All rights reserved. JEL classification: J64; J65