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Turning static pessimism to dynamic optimism. An ex-ante evaluation of unemployment insurance reform in Finland

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Kotamäki M, Mattila J, Tervola J. Turning static pessimism to dynamic optimism. An ex-ante evaluation of unemployment insurance reform in Finland. Working papers 124, Kela. http://hdl.handle.net/10138/212599

Published in: Government & Nonprofit
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Turning static pessimism to dynamic optimism. An ex-ante evaluation of unemployment insurance reform in Finland

  1. 1. Turning static pessimism to dynamic optimism An ex-ante evaluation of unemployment insurance reform in Finland Mauri Kotamäki, Jukka Mattila and Jussi Tervola Työpapereita 124, 2017
  2. 2. Background • Objective: To evaluate ex-ante dynamic i.e. behavioral effects of unemployment insurance reform that took place in the beginning of 2017 in Finland. The potential benefit duration was cut by 100 days. • Data: Register population sample of 800,000 individuals • Method: Microsimulation (SISU model), calculating multiple scenarios with different labor supply elasticities, baseline being the elasticity of 0.7 2
  3. 3. Conclusions • Accounting for the behavioral response changes the evaluated impact of the reform significantly. • Compared to the static scenario, • Negative effect on household finances is neutralized (-48 → +2 M€) • Positive effect on public finances more than doubles (+48 → +116 M€) • Marginal increase of inequality is neutralized (Gini +0.02 → ±0) • However, the result is sensitive to elasticity estimate. Existing literature favours our choice of baseline elasticity (0.7). 3

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