Measuring the Changing Generosity of Unemployment Benefits : Beyond Existing Indicators

There has long been a consensus that generous unemployment benefits probably raise unemployment rates. The link has been difficult to demonstrate, however, since existing indicators on the generosity of unemployment benefits overlook key aspects of the system that may influence worker response. The author develops a new indicator for unemployment benefits in 21 countries in the 1950-2003 time period which combines the amount of the subsidy with their tax treatment, their duration and the conditions that must be met in order to collect them. The new indicator shows that benefit generosity has indeed risen over time and differs greatly among countries, opening up future directions for empirical research