Insurances against job loss and disability

Essay 1

Employment Security Agreements, which are elements of Swedish collective agreements, offer a unique opportunity to study very early job search counselling of displaced workers. These agreements provide individual job search assistance to workers who are dismissed due to redundancy, often as early as during the period of notice. Compared to traditional labor market policies, the assistance provided is earlier and more responsive to the needs of the individual worker. In this study, I investigate the effects of the individual counseling and job search assistance provided through the Employment Security Agreement for Swedish blue-collar workers on job finding and subsequent job quality. The empirical strategy is based on the rules of eligibility in a regression discontinuity framework. I estimate the effect for workers with short tenure, who are dismissed through mass-layoffs. My results do not suggest that the program has an effect on the probability of becoming unemployed, the duration of unemployment, or income. However, the results indicate that the program has a positive effect on the duration of the next job.

Essay II

The well-known positive relationship between the unemployment benefit level and unemployment duration can be separated into two potential sources; a moral hazard effect, and a liquidity effect pertaining to the increased ability to smooth consumption. The latter is a socially optimal response due to credit and insurance market failures. These two effects are difficult to separate empirically, but the social optimality of an unemployment insurance policy can be evaluated by studying the effect of a non-distortionary lump-sum severance grant on unemployment durations. In this study, I evaluate the effects on unemployment duration and subsequent job quality of a lump-sum severance grant provided to displaced workers, by means of a Swedish collective agreement. I use a regression discontinuity design, based on the strict age requirement to be eligible for the grant. I find that the lump-sum grant has a positive effect on the probability of becoming unemployed and the length of the completed unemployment duration, but no effect on subsequent job quality. My analysis also indicates that spousal income is important for the consumption smoothing abilities of displaced workers, and that the grant may have a greater effect in times of more favorable labor market conditions.

Essay III

Evidence from around the world suggest that individuals who are awarded disability benefits in some cases still have residual working capacity, while disability insurance systems typically involve strong disincentives for benefit recipients to work. Some countries have introduced policies to incentivize disability insurance recipients to use their residual working capacities on the labor market. One such policy is the continuous deduction program in Sweden, introduced in 2009. In this study, I investigate whether the financial incentives provided by this program induce disability insurance recipients to increase their labor supply or education level. Retroactively determined eligibility to the program with respect to time of benefit award provides a setting resembling a natural experiment, which could be used to estimate the effects of the program using a regression discontinuity design. However, a simultaneous regime change of disability insurance eligibility causes covariate differences between treated and controls, which I adjust for using a matching strategy. My results suggest that the financial incentives provided by the program have not had any effect on labor supply or educational attainment.