Unemployment Insurance as a Subsidy to Risky Firms

Bernardus Van Doornik, Dimas Fazio, David Schoenherr, Janis Skrastins

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


We document that a more generous unemployment insurance (UI) system shifts labor supply from safer to riskier firms and reduces the compensating wage differentials that risky firms need to pay. Consequently, a more generous UI system increases risky firms' value and fosters entrepreneurship by reducing new firms' labor costs. Exploiting a UI reform in Brazil that affects only part of the workforce allows us to compare labor supply for workers with different degrees of UI protection within the same firm, sharpening the identification of the results. Altogether, our results suggest that UI provides a transfer system from safe to risky firms.

Original languageEnglish (US)
Pages (from-to)5535-5595
Number of pages61
JournalReview of Financial Studies
Issue number12
StatePublished - Dec 1 2022

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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