Impact of drastic cuts in accessing insured benefits on health and labour market outcomes

In this research project, we estimate the causal effects of two radical reforms of the social benefit system.

The first is a drastic cut in potential unemployment insurance benefit duration which happened in 2011 in Hungary. We analyse transitions out of unemployment in the short term, as well as earnings and stability of employment in the medium term. We hypothesize that lower social security payments due to finding lower paying and more unstable jobs, as well as potentially higher welfare benefit payment due to recurring unemployment offset significantly the original budgetary objectives of this reform.

Our identification strategy relies on a regression discontinuity design, as we compare the outcomes of those who lost their jobs just before the reform came into effect to displaced workers from just after the reform. We will use a high-quality large matched employer-employee administrative dataset (ADMIN3) covering 2003-2017.

The second project investigates the impacts of a major disability reform in 2012 in Hungary, which aimed not only to curb inflow into disability benefits but also to reactivate disabled beneficiaries with some remaining working capacity. Using the same database, we intend to apply difference-in-difference and matching methods to estimate the causal impact of reentering the labor market after a period of inactivity. Our rich database and the large-scale reform allows us to investigate the dynamics of the impact on health, employment prospects and job quality in more detail than in the previous literature.

Our project aims to provide empirical evidence and guidance for employment and social policies and to contribute to offer recommendations towards a more evidence-based design of unemployment and social benefits in Hungary.

The research proposal was granted financial support from the National Research, Development and Innovation Office (NKFIH).