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The Displacement Effect of Reemployment Bonus Programs

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  • Davidson, Carl
  • Woodbury, Stephen A

Abstract

The authors develop a partial equilibrium matching model of the labor market in order to examine whether adoption of a reemployment bonus would displace workers not offered the bonus. They examine the displacement effect for (1) unemployment-insurance-eligible workers who are offered but do not find a job in time to qualify for a bonus and (2) unemployment-insurance-ineligible workers who are never offered a bonus. The model predicts minimal displacement of the former group. But for the latter group, the model predicts an increase in unemployment duration of 0.2-0.4 week and an increase in unemployment of up to two per thousand. Copyright 1993 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 11 (1993)
Issue (Month): 4 (October)
Pages: 575-605

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Handle: RePEc:ucp:jlabec:v:11:y:1993:i:4:p:575-605

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  1. repec:fth:prinin:242 is not listed on IDEAS
  2. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
  3. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  4. Stephen A. Woodbury, 2009. "Unemployment," Book chapters authored by Upjohn Institute researchers, in: Kenneth G. Dau-Schmidt & Seth D. Harris & Orley Lobel (ed.), Labor and Employment Law and Economics, volume 2, pages 480-516 W.E. Upjohn Institute for Employment Research.
  5. Bruce D. Meyer, 1988. "Implications of the Illinois Reemployment Bonus Experiments For Theories of Unemployment and Policy Design," NBER Working Papers 2783, National Bureau of Economic Research, Inc.
  6. Seater, John J, 1979. "Job Search and Vacancy Contacts," American Economic Review, American Economic Association, vol. 69(3), pages 411-19, June.
  7. Kim B. Clark & Lawrence H. Summers, 1984. "Unemployment Insurance and Labor Force Transitions," NBER Working Papers 0920, National Bureau of Economic Research, Inc.
  8. Pissarides, C A, 1984. "Efficient Job Rejection," Economic Journal, Royal Economic Society, vol. 94(376a), pages 97-108, Supplemen.
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