Benefit Duration, Job Search Behavior and Re-Employment

35 Pages Posted: 7 Apr 2020

Date Written: 2020

Abstract

This paper studies how the potential duration of unemployment benefits affects individuals' job search behavior and re-employment outcomes. We exploit an unexpected reform of the German unemployment insurance scheme in 2008, which increased the potential benefit duration from 12 to 15 months for recipients of age 50 to 54. Based on detailed survey data and difference-in-differences techniques, we estimate that one additional month of benefits reduces the number of filed applications by around 10% on average over the first two months of unemployment. Treatment effects on the reservation wage are positive but statistically insignificant. In a complementary analysis, we use social security data to investigate how the reform affected re-employment outcomes. The difference-in-differences estimates yield an elasticity of 0.24 (0.1) additional months in unemployment (nonemployment) per additional month of potential benefits. A cautious back-of-the-envelope calculation reveals substantial returns to early search effort.

Keywords: unemployment insurance, job search, re-employment outcomes, natural experiment

JEL Classification: D830, I380, J640, J680

Suggested Citation

Lichter, Andreas and Schiprowski, Amelie, Benefit Duration, Job Search Behavior and Re-Employment (2020). CESifo Working Paper No. 8194, Available at SSRN: https://ssrn.com/abstract=3570297

Andreas Lichter (Contact Author)

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