duration of the benefits change over time, in addition to behavioral differences between benefit recipients and non-recipients - we will argue that this approach constitutes a more accurate test for the presence of incentive/disincentive effects. We also expand the scope of our analysis to study the effect of recipiency on several outcomes besides exit from unemployment (e.g. unemployment duration, job search).

7. We find that there are important behavioral differences between those who receive benefits and those who do not. The former tend to spend more time unemployed, but they also look for employment more actively than their counterparts, have more demanding preferences regarding their future jobs, and find jobs in the private sector more often. In addition, these jobs turn out to be better matches than the ones obtained by non-recipients (where match quality is measured as duration of the match).

8. Moreover, the behavior of recipients varies tremendously depending on whether they are actually receiving benefits or not. In particular, they exit the registry at a higher rate, search more actively, and move into private-sector jobs more often, once benefits are exhausted. So when we use these workers as their own control group, we do find strong evidence that both unemployment insurance and social assistance/support have important disincentive effects, not only on unemployment duration, but also on search behavior and on exit-to-employment.

9. The remaining of the paper is structured as follows. Section B briefly describes the evolution of unemployment as well as the characteristics of the unemployed, comparing them to the rest of the population. Section C provides an overview of the main features of the unemployment insurance, social assistance and social support programs, and section D discusses some examples that illustrate the potential disincentive effects associated with them. The data is presented in section E, and the empirical strategy in section F, together with some methodological issues. Section G contains the results, and finally section H concludes with a discussion of such results and their policy implications.

# B. UNEMPLOYMENT **AND** THE UNEMPLOYED<sup>3</sup>

10. Unemployment in the Slovak Republic increased sharply after the transition, reaching 13 percent in 1993, and remained fairly stable until 1997. Since then it has been growing quite substantially, up to a record high of 18.7 percent in the first semester of 2000. Moreover, all throughout this period, registered unemployment has been higher than unemployment measured by the Labor Force Survey, with the exception of 2000. This discrepancy is believed to reflect the potential disincentive effects associated with the unemployment insurance and social assistance systems, especially since most of the difference between both rates is due to the group of short-term and medium term unemployed (Lubyova, 2000).

11. In combination with the growing incidence of unemployment, more than 50 percent of all unemployed individuals have been so for more than a year. The share of long-term unemployment has been quite stable over time, and hence not very responsive to neither the business cycle nor reforms of the safety net. The fraction of long-term unemployed is higher

> 3 All tables corresponding to Section B are shown in Annex **I.**

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