1 DO UNEMPLOYMENT BENEFIT LEGISLATIVE CHANGES AFFECT JOB FINDING? EVIDENCE FROM THE SPANISH 1992 UI REFORM ACT ♣ José M. Arranz ♠ josem.arranz@uah.es Fernando Muñoz-Bullón ♦ fernando.munoz@uc3m.es Juan Muro ♦ juan.muro@uah.es January, 2008 Abstract Using a rich administrative dataset on unemployment insurance benefit recipients, the current work analyses the Spanish 1992 Reform Act implemented to reduce the generosity of the unemployment compensation system —in particular, a decrease in the level of unemployment insurance benefits and in entitlement duration. For this purpose, we compare unemployment insurance exit rates for two large sub-samples of individuals: the first sub-sample includes those who started receiving unemployment insurance benefits in 1991 (the pre-reform sub-sample) and the second sub-sample includes those who did so during 1993 (the post-reform sub-sample). Results indicate that these legislative changes had a positive though modest effect on individuals’ exit rate from unemployment: the 10-percent decrease in unemployment insurance benefit levels was associated with a 5-percent increase in the transition rate out of unemployment, while the reduction implemented in the potential unemployment insurance duration implied a 2-percent increase in the hazard rate out of unemployment. JEL Classification Numbers: J64, J65. Keywords: labour reforms, benefit cuts, unemployment insurance, discrete-time duration models, administrative dataset ♣ The authors thank funding support from the Instituto de Estudios Fiscales (IEF) for this research. We are indebted to Richard Blundell for their comments and suggestions in previous versions of this paper. We would also like to thank Luis Toharia and the Spanish Public Employment Agency (INEM) for providing the data set used, as well as participants at the VII Jornadas de Economía Laboral (Gran Canaria, 2007). The usual disclaimer applies. ♠ Author for correspondence: José Mª Arranz. Universidad de Alcalá, Departamento de Estadística, Estructura Económica y OEI. Plaza de la Victoria 2, Alcalá de Henares 28802, Madrid, SPAIN. ♦ Universidad Carlos III de Madrid. Sección de Organización de Empresas. C/Madrid, 126. 28903 Getafe (Madrid). SPAIN. ♦ Universidad de Alcalá, Departamento de Estadística, Estructura Económica y OEI. Plaza de la Victoria 2, Alcalá de Henares 28802, Madrid, SPAIN.