Timed to Say Goodbye: Does Unemployment Benefit Eligibility Affect Worker Layoffs?

Abstract

We study how unemployment benefit eligibility affects the layoff exit rate by exploiting quasi-experimental variation in eligibility rules in Italy. By using a difference-in-differences estimator, we find an instantaneous increase of about 12% in the layoff probability when unemployment benefit eligibility is attained, which persists for at least 16 weeks. These findings are robust to different identifying assumptions and are mostly driven by jobs started after the onset of the Great Recession and in the South.