What Have We Learned from the Illinois Reemployment Bonus Experiment?

This article analyzes an experimental program that offered payments to unemployment insurance recipients who found a job quickly. The experiment provided exogenous differences in individual incentives, which the author uses to test labor supply and search theories of unemployment. He examines predictions about the timing of exits from unemployment and the effect of the fixed-amount bonus on different wage level groups. The author also argues that the experimental evidence does not show the desirability of a permanent program. A permanent program would sharply increase the compensation for short unemployment insurance spells, likely increasing the claims rate and possibly increasing unemployment. Copyright 1996 by University of Chicago Press.