The effect of receiving supplementary UI benefits on unemployment duration

We consider the consequences of working part-time and receiving supplementary benefits for part-time unemployment in the Danish labor market. Following the timing-of-events approach we estimate causal effects of part-time work with supplementary benefits on the hazard rate out of unemployment insurance benefit receipt. We find evidence of a negative in-treatment effect and a positive post-treatment effect, both of which vary across different groups of individuals. The resulting net effect on the expected unemployment duration is positive for some groups (e.g. married women) and negative for others (e.g. young workers).

► On average, receipt of supplementary UI benefits reduces unemployment duration.
► The effect of supplementary UI benefits is very heterogeneous.
► For some groups supplementary benefits provide a stepping stone to regular employment.
► Young workers and 1st generation non-Western immigrants benefit from the scheme.