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Welfare Benefits and Unemployment in Affluent Democracies: The Moderating Role of the Institutional Insider/Outsider Divide
[journal article]
Abstract The effect of generous welfare benefits on unemployment is highly contested. The dominant perspective contends that benefits provide disincentive to work, whereas others portray benefits as job-search subsidies that facilitate better job matches. Despite many studies of welfare benefits and unemploy... view more
The effect of generous welfare benefits on unemployment is highly contested. The dominant perspective contends that benefits provide disincentive to work, whereas others portray benefits as job-search subsidies that facilitate better job matches. Despite many studies of welfare benefits and unemployment, the literature has neglected how this relationship might vary across institutional contexts. This article investigates how unemployment benefits and minimum income benefits affect unemployment across levels of the institutional insider/outsider divide. I analyze the moderating role of the disparity in employment protection for holders of permanent and temporary contracts and of the configuration of wage bargaining. The analysis combines data from 20 European countries and the United States using the European Union Labour Force Survey and the Current Population Survey 1992-2009. I use a pseudo-panel approach, including fixed effects for sociodemographic groups within countries and interactions between benefits and institutions. The results indicate that unemployment benefits and minimum income benefits successfully subsidize job search and reduce unemployment in labor markets with a moderate institutional insider/outsider divide. However, when there is greater disparity in employment protection and when bargaining either combines low unionization with high centralization or high unionization with low centralization, generous benefits create a disincentive to work, plausibly because attractive job opportunities are scarce.... view less
Keywords
unemployment; social assistance; social benefits; unemployment compensation; insurance claim; minimum income; employment promotion; activating labor market policy; job security; welfare state; EU; United States of America
Classification
Social Security
Labor Market Research
Free Keywords
institutional interactions; labor market institutions; quantitative methods
Document language
English
Publication Year
2017
Page/Pages
p. 1037-1064
Journal
American Sociological Review, 82 (2017) 5
Handle
https://hdl.handle.net/10419/181677
ISSN
1939-8271
Status
Published Version; peer reviewed
Licence
Deposit Licence - No Redistribution, No Modifications
With the permission of the rights owner, this publication is under open access due to a (DFG-/German Research Foundation-funded) national or Alliance license.