Several previous studies have estimated that unemployment insurance (UI) causes an increase in the duration of unemployment and have concluded from this that UI raises reservation wages. However, job-search theory implies that UI can also affect duration through its impact on job offer arrival rates and/or through an impact on wage offers. In this paper we attempt to identify these possible additional effects using survey data on a sample of unemployed individuals. Like previous studies, we find that UI significantly increases unemployment duration. However, part of this effect is estimated to stem from a decrease in the offer arrival rate as well as from a higher reservation wage.
ASJC Scopus subject areas
- Economics and Econometrics