Daphne Skandalis, Federal Reserve Bank of New York

Unemployment Insurance and Job Search Behavior



Abstract

Unemployment benefits provide workers with insurance at job loss and affect their behavior due to moral hazard. We shed new light on the moral hazard effect using longitudinal data on job search behavior instead of the typical data on unemployment spells: we track applications on a major online search platform for 500,000 French unemployed workers. We document key new facts about the dynamic impact of unemployment insurance (UI): workers increase their search intensity and decrease their target wage in the quarters before benefits exhaustion. After exhaustion, they keep a relatively high search intensity and low target wage. Our findings closely match the predictions of the standard search model, and  contradict search-free models where UI only subsidizes leisure. Prior results seemingly inconsistent with the standard search model can be explained by dynamic selection and duration dependence. Using structural estimation, we show that including behavioral reference-dependent preferences does not improve how the standard search model fits the empirical search behavior. Overall, our results support the standard search model, and hence the large body of UI literature based on this model.

Daphne Skandalis joined the Federal Reserve Bank of New York in October 2018 as an Economist in the Microeconomic Studies Function. Her research interests include labor economics, applied microeconomics and public economics.

Her current research focuses on the behavioral response to unemployment insurance, the connection between information frictions and labor mobility, gender differences in job search and the impact of counselling programs on job seeker's expectations and employment outcomes. Daphne received her PhD in Economics from Paris-Saclay University in September 2018.

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