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http://ssrn.com/abstract=964980
 
 

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The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?


David Card


University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Raj Chetty


University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Andrea Weber


University of Mannheim; Austrian Institute of Economic Research (WIFO); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

January 2007

IZA Discussion Paper No. 2590

Abstract:     
In this paper, we review the literature on the "spike" in unemployment exit rates around benefit exhaustion, and present new evidence based on administrative data for a large sample of job losers in Austria. We find that the way unemployment spells are measured has a large effect on the magnitude of the spike at exhaustion, both in existing studies and in our Austrian data. Spikes are typically much smaller when spell length is defined by the time to next job than when it is defined by the time spent on the unemployment system. In Austria, the exit rate from registered unemployment rises by over 200% at the expiration of benefits, while the hazard rate of re-employment rises by only 20%. The difference between the two measures arises because many individuals leave the unemployment register immediately after their benefits expire without returning to work. The modest spike in re-employment rates implies that most job seekers do not wait until their UI benefits are exhausted to return to work: fewer than 1% of jobless spells have an ending date that is manipulated to coincide with the expiration of UI benefits.

Number of Pages in PDF File: 33

Keywords: unemployment duration, job search, unemployment insurance

JEL Classification: J64, J65

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Date posted: February 26, 2007  

Suggested Citation

Card, David and Chetty, Raj and Weber, Andrea, The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job? (January 2007). IZA Discussion Paper No. 2590. Available at SSRN: http://ssrn.com/abstract=964980

Contact Information

David E. Card (Contact Author)
University of California, Berkeley - Department of Economics ( email )
Room 3880
Berkeley, CA 94720-3880
United States
510-642-5222 (Phone)
510-643-7042 (Fax)
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Nadarajan (Raj) Chetty
University of California, Berkeley - Department of Economics ( email )
549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-643-0708 (Phone)
510-643-0413 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Andrea Michaela Weber
University of Mannheim ( email )
D-68131 Mannheim
Germany
+49 6211811928 (Phone)
Austrian Institute of Economic Research (WIFO) ( email )
P.O. Box 91
Wien, A-1103
Austria
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
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