Unemployment Insurance and Job Search Behavior

115 Pages Posted: 3 Jan 2019 Last revised: 25 Jun 2020

See all articles by Ioana Elena Marinescu

Ioana Elena Marinescu

University of Pennsylvania - School of Social Policy & Practice; National Bureau of Economic Research (NBER)

Daphné Skandalis

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: November 18, 2019

Abstract

Unemployment insurance (UI) can affect unemployment duration and re-employment wages, through various dimensions of unemployed workers’ job search behavior. We shed light on the effects of UI on job search behavior using new longitudinal data: we link administrative registers to data from a major online search platform, and track the job applications sent over the unemployment spells of about 500,000 French workers. We identify changes in individual search behavior caused by UI around benefits exhaustion, after accounting for changes in the sample composition—i.e. dynamic selection—and for the effect of the time spent unemployed—i.e. duration dependence. We show that search effort (the count of job applications) increases by at least 50% during the year preceding benefits exhaustion and remains relatively high thereafter. The target monthly wage decreases by at least 2.4% during the year preceding benefits exhaustion, and remains relatively low thereafter. We document particularly large dynamic selection around benefits exhaustion, as some workers increase their search effort more before exhaustion and find a job faster. We also show evidence for duration dependence: workers decrease their target wage by 1.5% over each year of unemployment, irrespective of their UI status. Overall, the effect of UI on individual search behavior is consistent with the predictions of search models and constitutes evidence against search-free models where UI merely subsidizes leisure.

Suggested Citation

Marinescu, Ioana Elena and Skandalis, Daphné, Unemployment Insurance and Job Search Behavior (November 18, 2019). Available at SSRN: https://ssrn.com/abstract=3303367 or http://dx.doi.org/10.2139/ssrn.3303367

Ioana Elena Marinescu

University of Pennsylvania - School of Social Policy & Practice ( email )

3701 Locust Walk
Philadelphia, PA 19104-6214
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Daphné Skandalis (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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