Unemployment Insurance and Reservation Wages: Evidence from Administrative Data

41 Pages Posted: 15 May 2017

See all articles by Thomas Le Barbanchon

Thomas Le Barbanchon

Bocconi University

Roland Rathelot

University of Warwick - Department of Economics

Alexandra M. Roulet

Harvard University - Department of Economics

Date Written: May 2017

Abstract

Although the reservation wage plays a central role in job search models, empirical evidence on the determinants of reservation wages, including key policy variables such as unemployment insurance (UI), is scarce. In France, unemployed people must declare their reservation wage to the Public Employment Service when they register to claim UI benefits. We take advantage of these rich French administrative data and of a reform of UI rules to estimate the effect of the potential benefit duration (PBD) on reservation wages and on other dimensions of job selectivity, using a difference-in-difference strategy. We cannot reject that the elasticity of the reservation wage with respect to PBD is zero. Our results are precise and we can rule out elasticities larger than 0.006. Furthermore, we do not find any significant effects of PBD on the desired number of hours, duration of labor contract and commuting time/distance. The estimated elasticity of actual benefit duration with respect to PBD of 0.3 is in line with the consensus in the literature. Exploiting a regression discontinuity design as an alternative identification strategy, we find similar results.

Keywords: reservation wage, Unemployment insurance

JEL Classification: J64, J65

Suggested Citation

Le Barbanchon, Thomas and Rathelot, Roland and Roulet, Alexandra M., Unemployment Insurance and Reservation Wages: Evidence from Administrative Data (May 2017). CEPR Discussion Paper No. DP12030, Available at SSRN: https://ssrn.com/abstract=2968371

Thomas Le Barbanchon (Contact Author)

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Roland Rathelot

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Alexandra M. Roulet

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

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