Persistent Unemployment and the Generosity of Welfare States

Generous unemployment benefits are a conventional explanation of the high rates of unemployment in many OECD countries. However, this perception has been challenged on the basis that cross-national evidence comes only from regression analyses of unemployment on the OECD's gross replacement rate but that results are not robust to improved, multidimensional measures of generosity. In this article, I conduct a detailed empirical analysis of how social welfare programs affect unemployment in 17 OECD countries, from 1975 to 2000, using a detailed concept of labor "decommodification" to make cross-national comparisons of generosity. The results show that unemployment benefits remain an important, robust determinant of unemployment even when the new measure is used.