Working Paper: NBER ID: w27037
Authors: Stefano Dellavigna; Jörg Heining; Johannes F. Schmieder; Simon Trenkle
Abstract: The job finding rate of Unemployment Insurance (UI) recipients declines in the initial months of unemployment and then exhibits a spike at the benefit exhaustion point. A range of theoretical explanations have been proposed, but those are hard to disentangle using data on job finding alone. To better understand the underlying mechanisms, we conducted a large text-message-based survey of unemployed workers in Germany. We surveyed 6,349 UI recipients twice a week for 4 months about their job search effort. The panel structure allows us to observe how search effort evolves within individuals over the unemployment spell. We provide three key facts: 1) search effort is flat early on in the UI spell, 2) search effort exhibits an increase up to UI exhaustion and a decrease thereafter, 3) UI recipients do not appear to time job start dates to coincide with the UI exhaustion point. A standard search model with unobserved heterogeneity struggles to explain the second fact, and a model of storable offers is not consistent with the third fact. The patterns are well captured by a model of reference-dependent job search or by a model with duration dependence in search cost.
Keywords: No keywords provided
JEL Codes: D9; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unemployment Insurance (UI) (J65) | Job Search Effort (J68) |
| Impending Loss of Benefits (H55) | Increased Job Search Activity (J68) |
| Job Start Dates Timing (C41) | Job Search Effort (J68) |