Unemployment Benefits in the EU - Obstacle or Booster of Total Factor Productivity?
|Year of publication||2020|
|Type||Article in Proceedings|
|Conference||Proceedings of IAC 2020 in Vienna|
|MU Faculty or unit|
|Keywords||unemployment benefits; total factor productivity; the European Union; panel cointegration regression|
|Description||The topic to reform the current unemployment benefit systems is highly discussed among the European authorities. The aim of the paper is to determine the long-term effect of unemployment benefits on total factor productivity in the member states of the European Union. By means of cointegration panel regression, the long-term impact of unemployment benefits on the total factor productivity index is estimated on the sample of 28 member states. The observations cover a period from 1995 to 2017. Total factor productivity is defined as the Solow residual and in line with endogenous growth theories explained as a product of knowledge (proxied by human capital stock and research and development stock) and residual set of factors, including institutions. The empirical results confirm the presence of log-term cointegrated relations between unemployment benefits and total factor productivity, while their effect is estimated as negative. The findings imply an importance of adequate policy measures to decrease the generosity of national unemployment benefit systems.|