How unemployment benefits affect individuals of different wealth classes : Some evidence from Italy

Purpose – This paper investigates whether the effect of unemployment benefits (UB) on unemployment duration is the same for individuals belonging to different wealth groups. Design/methodology/approach – Using a sample of newly unemployed individuals from Italy in 2007, we perform estimations of semi‐parametric and parametric Cox hazard models and finds a significant interaction between benefits and wealth. Findings – In particular, we show that the mitigating effect of benefits on liquidity constraints is less marked for individuals from richer households and therefore, for these individuals, benefits do not increase unemployment duration. Originality/value – The results also show that liquidity constraints are important in determining unemployment duration and that wealth has an important role in the actual effect of UB.