Working Paper: CEPR ID: DP14786
Authors: Nir Jaimovich; Domenico Ferraro; Francesca Molinari; Cristobal Young
Abstract: We develop a search-and-matching model where the magnitude of unemployment insurance benefits affects the likelihood that unemployed actually engage in active job search. To quan- titively discipline this relation we use administrative data of unemployed search audits. We use the model to quantify the effects of unemployment reforms. For small benefits’ increases, the policymaker faces a trade-off between an uptick in the measure of unemployed actually searching and a fall in the unemployment exit-rate conditional on searching. For larger bene- fits’ increases, an active search margin magnifies the benefits’ disincentives, leading to a bigger drop in the employment rate than previously thought.
Keywords: unemployment insurance; search behavior; costly search; liquidity effect
JEL Codes: E24; J64; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| More generous unemployment insurance benefits (J65) | Increase in the likelihood of unemployed individuals actively searching for jobs (J64) |
| Increase in unemployment benefits (J65) | Increase in the likelihood of job search (J62) |
| Small increases in unemployment benefits (J65) | More individuals searching for jobs (J23) |
| Larger increases in unemployment benefits (J65) | Discouragement of job search (J68) |
| Increase in benefits (H55) | Interaction with job finding probabilities can lead to unexpected outcomes in employment rates (J68) |