Does extending unemployment benefits improve job quality?
2015 (English)Report (Other academic)
Contrary to standard search model predictions, prior studies failed to estimate a positive effect of unemployment insurance (UI) on reemployment wages. This paper estimates a positive UI wage effect exploiting an age-based regression discontinuity in Austrian administrative data. A search model incorporating duration dependence determines the UI wage effect as the balance between two offsetting forces: UI causes agents to seek higher-wage jobs, but also reduces wages by lengthening unemployment. This implies a negative relationship between the UI unemployment duration and wage effects, which holds empirically both in our sample and across studies, reconciling disparate wage-effect estimates. Empirically, UI raises wages by improving reemployment firms' quality and attenuating wage drops.
Place, publisher, year, edition, pages
, CEPR Working Paper Series, 10568
job search, regression discontinuity design, unemployment insurance, wages
Research subject Economics
IdentifiersURN: urn:nbn:se:su:diva-125232OAI: oai:DiVA.org:su-125232DiVA: diva2:892128