Degressivity of unemployment benefits and the rate of return to employment: an empirical analysis of Unédic data.

Summary In this thesis, we examine the effect of the time profile of unemployment compensation on the rate of return to employment of the unemployed by comparing two successive regulations. The old regulation (1986-1992) is characterized by a single drop in the level of compensation while the new one (1993-1996) is characterized by successive drops. Estimates of duration models show that under the pre-1992 regulation, the rate of job re-entry increases sharply as the end of the full benefit period approaches. This result holds mainly for unemployed persons with the highest previous wages. The transition to the new regulations has had the effect of smoothing the temporal profile of job re-entry rates. Our study also shows that, even after controlling for the effects of cyclical changes in the labor market, there is still a gap between the probabilities of returning to work under the old and new regulations. This residual difference can be explained by the difference in the time profiles of compensation. This means that the introduction of a more degressive time profile of benefits probably slowed down the return to employment.