Main Article Content
Abstract
Purpose ― This study examines the impacts of the Unemployment Benefit Program (Jaminan Kehilangan Pekerjaan, JKP) on the duration of job search in Indonesia using internal data sourced from the Employment Social Security Administering Agency (Badan Penyelenggara Jaminan Sosial Tenaga Kerja, BPJS TK).
Method ― The Regression Kinked Design (RKD) model and Ordinary Least Square (OLS) estimation method are used to analyze the data on laid-off workers who have received the JKP benefits.
Findings ― On average, the JKP beneficiaries have a longer duration of job search than laid-off workers who do not receive benefits. An increase in the replacement rate of the JKP benefits is associated with an increased duration of both job search and benefit claims. The RKD plot indicates that a replacement rate lower than 45% may decrease the duration of benefit claims and job searches.
Implication ― The results imply that the government should consider two potential options: (1) maintaining the current level of monetary benefits that leads to a longer job search duration; in other words, the program management must continue providing benefits for the maximum duration offered (up to 6 months), or, (2) reducing the monetary benefits, if BPJS TK aims to reduce the job duration. The results may change if a more robust labor market information system is available.
Originality ― This study represents the first attempt to investigate the impact of the Unemployment Benefit Program (JKP) on job search duration in Indonesia. It might also be important to enrich the existing literature on the impact of similar programs in developing countries and countries with large populations.
Keywords
Article Details
Copyright (c) 2024 Turro, Tarimantan Sanberto Saragih, Flora, Hanum, Aditya Harin Nugroho, Rihlah, Eldest Augustin, Kania Fitriani, Fergie Stevi Mahaganti, Maurizky Febriansyah
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References
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- Card, D., Lee, D. S., Pei, Z., & Weber, A. (2015). Inference on causal effects in a generalized regression kink design. Econometrica, 83(6), 2453–2483. https://doi.org/10.3982/ecta11224
- Card, D., Lee, D. S., Pei, Z., & Weber, A. (2016). Regression kink design: Theory and practice (22781; NBER Working Paper Series). https://doi.org/10.3386/w22781
- Chang, Y.-L. (2020). Does state unemployment insurance modernization explain the trajectories of economic security among working households? Longitudinal evidence from the 2008 survey of income and program participation. Journal of Family and Economic Issues, 41(2), 200–217. https://doi.org/10.1007/s10834-020-09661-4
- Cunningham, W. (2000). Unemployment insurance in Brazil: Unemployment duration, wages, and sectoral choice.
- Dartanto, T., Susanti, H., Augustin, E., & Fitriani, K. (2023). Reemployment during the Covid-19 pandemic in Indonesia: What kinds of skill sets are needed? Cogent Economics & Finance, 11(2), 2210382. https://doi.org/10.1080/23322039.2023.2210382
- Farber, H. S., & Valletta, R. G. (2015). Do extended unemployment benefits lengthen unemployment spells? Evidence from recent cycles in the U.S. labor market. The Journal of Human Resources, 50(4), 873–909.
- Gelman, A., & Imbens, G. (2019). Why high-order polynomials should not be used in regression discontinuity designs. Journal of Business & Economic Statistics, 37(3), 447–456. https://doi.org/10.1080/07350015.2017.1366909
- Holmlund, B. (1998). Unemployment insurance in theory and practice. The Scandinavian Journal of Economics, 100(1), 113–141. https://doi.org/10.1111/1467-9442.00093
- Jesse, R. (2011). Unemployment insurance and job search in the great recession (Brookings Papers on Economic Activity).
- Katz, L. F., & Meyer, B. D. (1990). The impact of the potential duration of unemployment benefits on the duration of unemployment. Journal of Public Economics, 41(1), 45–72. https://doi.org/10.1016/0047-2727(92)90056-L
- Landais, C. (2015). Assessing the welfare effects of unemployment benefits using the regression kink design. American Economic Journal: Economic Policy, 7(4), 243–278. https://doi.org/10.1257/pol.20130248
- Lechthaler, W., & Ring, P. (2021). Labor force participation, job search effort and unemployment insurance in the laboratory. Journal of Economic Behavior & Organization, 189, 748–778. https://doi.org/10.1016/j.jebo.2021.06.048
- Liepmann, H., & Pignatti, C. (2024). Welfare effects of unemployment benefits when informality is high. Journal of Public Economics, 229, 105032. https://doi.org/10.1016/j.jpubeco.2023.105032
- Mckenzie, D. (2016). Tools of the trade: The regression kink design. World Bank Group. https://blogs.worldbank.org/en/impactevaluations/tools-trade-regression-kink-design
- Moffitt, R. (2014). Unemployment benefits and unemployment (13; IZA World of Labor). IZA World of Labor. https://doi.org/10.15185/izawol.13
- Morgandi, M., Fietz, K. M., Ed, M. L. S., De Farias, A. R., & Weber, M. (2020). Enhancing coverage and cost-effectiveness of Brazil’s unemployment protection system. World Bank.
- O’leary, C., Cravo, T., Sierra, A. N. A. C., & Justino, L. (2021). Effects of job referrals on labor market outcomes in Brazil. Economía, 21(2), 157–186.
- Robalino, D. (2014). Designing unemployment benefits in developing countries (15; IZA World of Labor, Vol. 15). IZA World of Labor. https://doi.org/10.15185/izawol.15
- Rotar, L. J., & Krsnik, S. (2020). Analysing the relationship between unemployment benefits and unemployment duration. Society and Economy, 42(3), 280–297. https://doi.org/10.1556/204.2020.00009
- Schmieder, J. F., von Wachter, T., & Bender, S. (2016). The effect of unemployment benefits and nonemployment durations on wages. American Economic Review, 106(3), 739–777. https://doi.org/10.1257/aer.20141566
- Sehnbruch, K., Carranza, R., & Contreras, D. (2020). Unemployment insurance in Chile: Lessons from a high inequality developing country (54; LSE Working Paper).
- Spiezia, V. (2000). The effects of benefits on unemployment and wages: A comparison of unemployment compensation systems. International Labour Review, 139(1), 73–90. https://doi.org/10.1111/j.1564-913X.2000.tb00403.x
- van den Berg, G. J., & Uhlendorff, A. (2023). Economic job search and decision-making models. In The Oxford handbook of job loss and job search (pp. 234–256). Oxford University Press.
- Vodopivec, M., & Raju, D. (2002). Income support systems for the unemployed: Issues and options (25529; Social Protection Discussion Papers and Notes).
- Zaretsky, A. M., & Coughlin, C. (1995). An introduction to the theory and estimation of a job-search model. Federal Reserve Bank of St. Louis Review, 77(1), 53–65. https://doi.org/10.20955/r.77.53-65
References
Baker, S. R., & Fradkin, A. (2017). The impact of unemployment insurance on job search: Evidence from Google search data. The Review of Economics and Statistics, 99(5), 756–768. https://doi.org/10.1162/REST_a_00674
Card, D., Lee, D. S., Pei, Z., & Weber, A. (2015). Inference on causal effects in a generalized regression kink design. Econometrica, 83(6), 2453–2483. https://doi.org/10.3982/ecta11224
Card, D., Lee, D. S., Pei, Z., & Weber, A. (2016). Regression kink design: Theory and practice (22781; NBER Working Paper Series). https://doi.org/10.3386/w22781
Chang, Y.-L. (2020). Does state unemployment insurance modernization explain the trajectories of economic security among working households? Longitudinal evidence from the 2008 survey of income and program participation. Journal of Family and Economic Issues, 41(2), 200–217. https://doi.org/10.1007/s10834-020-09661-4
Cunningham, W. (2000). Unemployment insurance in Brazil: Unemployment duration, wages, and sectoral choice.
Dartanto, T., Susanti, H., Augustin, E., & Fitriani, K. (2023). Reemployment during the Covid-19 pandemic in Indonesia: What kinds of skill sets are needed? Cogent Economics & Finance, 11(2), 2210382. https://doi.org/10.1080/23322039.2023.2210382
Farber, H. S., & Valletta, R. G. (2015). Do extended unemployment benefits lengthen unemployment spells? Evidence from recent cycles in the U.S. labor market. The Journal of Human Resources, 50(4), 873–909.
Gelman, A., & Imbens, G. (2019). Why high-order polynomials should not be used in regression discontinuity designs. Journal of Business & Economic Statistics, 37(3), 447–456. https://doi.org/10.1080/07350015.2017.1366909
Holmlund, B. (1998). Unemployment insurance in theory and practice. The Scandinavian Journal of Economics, 100(1), 113–141. https://doi.org/10.1111/1467-9442.00093
Jesse, R. (2011). Unemployment insurance and job search in the great recession (Brookings Papers on Economic Activity).
Katz, L. F., & Meyer, B. D. (1990). The impact of the potential duration of unemployment benefits on the duration of unemployment. Journal of Public Economics, 41(1), 45–72. https://doi.org/10.1016/0047-2727(92)90056-L
Landais, C. (2015). Assessing the welfare effects of unemployment benefits using the regression kink design. American Economic Journal: Economic Policy, 7(4), 243–278. https://doi.org/10.1257/pol.20130248
Lechthaler, W., & Ring, P. (2021). Labor force participation, job search effort and unemployment insurance in the laboratory. Journal of Economic Behavior & Organization, 189, 748–778. https://doi.org/10.1016/j.jebo.2021.06.048
Liepmann, H., & Pignatti, C. (2024). Welfare effects of unemployment benefits when informality is high. Journal of Public Economics, 229, 105032. https://doi.org/10.1016/j.jpubeco.2023.105032
Mckenzie, D. (2016). Tools of the trade: The regression kink design. World Bank Group. https://blogs.worldbank.org/en/impactevaluations/tools-trade-regression-kink-design
Moffitt, R. (2014). Unemployment benefits and unemployment (13; IZA World of Labor). IZA World of Labor. https://doi.org/10.15185/izawol.13
Morgandi, M., Fietz, K. M., Ed, M. L. S., De Farias, A. R., & Weber, M. (2020). Enhancing coverage and cost-effectiveness of Brazil’s unemployment protection system. World Bank.
O’leary, C., Cravo, T., Sierra, A. N. A. C., & Justino, L. (2021). Effects of job referrals on labor market outcomes in Brazil. Economía, 21(2), 157–186.
Robalino, D. (2014). Designing unemployment benefits in developing countries (15; IZA World of Labor, Vol. 15). IZA World of Labor. https://doi.org/10.15185/izawol.15
Rotar, L. J., & Krsnik, S. (2020). Analysing the relationship between unemployment benefits and unemployment duration. Society and Economy, 42(3), 280–297. https://doi.org/10.1556/204.2020.00009
Schmieder, J. F., von Wachter, T., & Bender, S. (2016). The effect of unemployment benefits and nonemployment durations on wages. American Economic Review, 106(3), 739–777. https://doi.org/10.1257/aer.20141566
Sehnbruch, K., Carranza, R., & Contreras, D. (2020). Unemployment insurance in Chile: Lessons from a high inequality developing country (54; LSE Working Paper).
Spiezia, V. (2000). The effects of benefits on unemployment and wages: A comparison of unemployment compensation systems. International Labour Review, 139(1), 73–90. https://doi.org/10.1111/j.1564-913X.2000.tb00403.x
van den Berg, G. J., & Uhlendorff, A. (2023). Economic job search and decision-making models. In The Oxford handbook of job loss and job search (pp. 234–256). Oxford University Press.
Vodopivec, M., & Raju, D. (2002). Income support systems for the unemployed: Issues and options (25529; Social Protection Discussion Papers and Notes).
Zaretsky, A. M., & Coughlin, C. (1995). An introduction to the theory and estimation of a job-search model. Federal Reserve Bank of St. Louis Review, 77(1), 53–65. https://doi.org/10.20955/r.77.53-65