Is sickness insurance a way to postpone job search?
In Hungary, employees could claim sickness insurance benefit within 3 days of job-loss, which would enable them to prolong their benefit duration by up to 90 days. The maximum number of days of this ‘passive sickness benefit’ was cut to half its value in 2007. We first investigate whether claiming passive sickness benefits was related to the monetary advantage relative to claiming unemployment insurance benefits. Then, we explore the effect of potential benefit durations on the transitions to stable employment relying on the variation induced by the policy change. Relying on high quality matched administrative longitudinal data we can estimate these relationships while using controls for employment histories and healthcare spending. On the one hand, we find that passive sickness benefit claiming behavior was indeed correlated with the financial gains. On the other hand, transitions to employment were not quicker when benefit durations were cut by 45 days.