Empirical Economics (1998) 23:155-175 EMPIRICAL ECONOMICS 9 Springer-Verlag1998 Unemployment assistance in Hungary* John Micklewright 1, Gyula Nagy 2 1UNICEF, International Child DevelopmentCentre, Piazza SS Annunziata 12, 1-50122Florence, Italy (e-mail:jmicklewright@unicef-icdc.it) 2Department of Human Resources, Budapest University of Economics, Frvfim trr 8, H-1093 Budapest, Hungary (e-mail: gynagy@sunshine.bke.hu) Abstract. Low outflow rates from unemployment and cuts in benefit entitle- ment periods resulted in sharp reductions in the coverage by Unemployment Insurance of the unemployed stock in Central and Eastern European coun- tries during the 1990s. From mid-1994 in Hungary the most common benefit received by the registered unemployed stock is means-tested Unemployment Assistance (UA) but so far very little is known about its receipt. In the paper, using microdata from the unemployment register we investigate the operation of the UA scheme in Hungary, including the benefit levels, the characteristics of benefit recipients and the determinants of flows to and from receipt. Key words: Unemployment benefit, Hungary JEL classification: J64, J65 1. Introduction Central and Eastern European governments in the early 1990s introduced limited-duration Unemployment Insurance (UI) as the primary form of in- come support for the unemployed. Low outflow rates, sometimes coupled with reductions in benefit entitlement periods, resulted in sharp reductions in the initially high coverage by UI of the unemployed stock. Exhaustion of UI * We thank the National Labour Centre for providing us with anonymisedmicrodata from the unemployment register. Financial support of the ILO/Japan Project on Employment Policies in Hungary is gratefully acknowledged. We also thank Gyrrgy L~,z/tr for his support, Zsuzsa Sfigi for assistance in the survey and Miklrs Nrmeth for assistance in data processing. Alena Nesporova and other participants at the IHS/OECD workshop on "Long-term Unemployment and the Transition from UnemploymentBenefits to Social assistance" in Vienna, November 1996 made useful comments. We thank in particular Cristoph Schmidt for his comments on earlier version of the paper.