Daphné Skandalis, Federal Reserve Bank of New York (Job Market Seminar)
“Unemployment Insurance and Job Search Behavior”
Unemployment insurance (UI) helps workers smooth their consumption at job loss and can affect their job search behavior. We shed light on the effect of UI on job search behavior using new longitudinal data: we track job applications sent on a major online search platform for 500,000 French unemployed workers. We show that, in the year before their benefits exhaustion, unemployed workers increase their search intensity and decrease their target wage. After exhaustion, they keep a relatively high search intensity and low target wage. This suggests that finite-duration UI has both a negative effect on unemployed workers’ search intensity and a positive effect on their target wage, and that these effects fade away over time—consistent with the predictions of the standard search model. Prior evidence seemingly inconsistent with these findings can largely be explained by dynamic selection and duration dependence. Our structural estimation shows that the standard search model fits our reduced-form estimates very well. The behavioral reference-dependent search model provides an even better fit, but with a small degree of reference-dependence that only slightly affects search behavior. Overall, our findings suggest that the standard search model provides a good approximation of the dynamic impact of UI on search behavior.
Contact person: Mette Ejrnæs