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Unemployment benefits, recurrence and returning to the previous occupation

9th National Competition for Economic Research Grants

Labour economics

Senior Researcher : José María Arranz Muñoz

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Research Centre or Institution : Universidad de Alcalá. Alcalá de Henares.

Abstract

The objective of the project is to examine some related questions between the unemployment protection system (UPS) and the process of moving back into employment, repeat unemployment and the return to the previous employment. The results show that there is a clear segmentation in the Spanish labour market between individuals who have longer periods of both unemployment with benefits and employment, and others who remain unemployed for a short time, with many re-occurrences, and short periods of employment. The results also suggest that a reform is necessary with regard to the funding of the UPS. In particular, the implementation of a charge for companies in the funding of the system of contributory benefits ("experience rating" or "bonus/malus system"), depending on their use, may be a means both to obtain adequate funding of the system and to avoid the problem of moral hazard and, therefore, of cross subsidies among companies and sectors that could be having a significant impact on the UPS as currently designed in Spain. In addition, advantage should also be taken of this system to reduce the perverse use of temporary contracts (with higher rates) and the repeated recourse to unemployment benefits.