Full Citation
Title: UNEMPLOYMENT INSURANCE: Disincentive Effects on Job Search in the Great Recession
Citation Type: Miscellaneous
Publication Year: 2016
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Abstract: Unemployment insurance (UI) benefits were extended during the Great Recession from 26 weeks to up to 99 weeks. In the years following, various studies have leveraged this unprecedented expansion of UI benefits in order to quantify the disincentive effects of UI on job search. Most studies indirectly examined the disincentive effects by using proxy measures such as unemployment duration or unemployment rate and have reached a wide range of conclusions from little to great measurable disincentive effect. In this paper, I take an alternative approach, using time-use data to directly quantify job search effort. I explore the effects of various specifications of the returns to search, macroeconomic conditions, and demographic characteristics on job search effort, at both the extensive and intensive margins of job search. Several results emerge. First, UI eligibility alone does not meaningfully impact job search effort. Second, raising unemployment benefit levels disincentivizes job search such that a 10% increase in the weekly maximum benefit amount is associated with a 5% decrease in daily job search time. Third, surprisingly, increasing UI duration does not significantly disincentivize, and may even incentivize job search effort. Finally, job search effort is procyclical, where a one percentage point increase in unemployment rate is associated with a 12% decrease in daily job search time. Taken together, these results imply that UI benefit extensions play an important counter-recessionary role and that fears of its disincentive effects are largely overblown.
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Authors: LEE, DARIEN; ALTONJI, DR. JOSEPH
Publisher: Yale University
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure, Other
Countries: United States