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Unemployment Insurance and Subsequent Job Duration: Job Matching vs Unobserved Heterogeneity

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  • Christian Belzil

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Abstract

The relationship between Unemployment Insurance (UI) benefit duration, unemployment duration and subsequent job duration is investigated using a multi-state duration model with state specific unobserved heterogeneity. I examine two potential explanations for the negative correlation between unemployment and job spell durations; UI benefits increase job matching quality (the Matching effect) vs unobserved heterogeneity (Adverse Selection). The Matching effect is found to be weak. Although new jobs accepted within 5 weeks of benefit termination seem to have a higher dissolution rate, the negative correlation between unemployment and job duration is mostly explained by unobserved heterogeneity. Various simulations indicate that increasing the maximum benefit duration by one week will raise expected unemployment duration by 1.0 to 1.5 days but will raise expected job duration by 0.5 to 0.8 days only. Dans cet article, j'analyse le lien entre la durée des prestations d'assurance-chômage, la durée du chômage et la durée de l'emploi subséquent. L'analyse est faite à l'aide d'un modèle de durée avec états multiples et hétérogénéité non-observée. ¸ l'aide du modèle, je tente de faire la distinction entre deux hypothèses possibles qui expliqueraient la corrélation négative entre durée de chômage et durée de l'emploi subséquent; la durée des prestations augmente la durée de l'emploi subséquent (un effet de matching), ou la corrélation négative est expliquée par la sélection adverse. Les résultats tendent à supporter l'hypothèse de sélection adverse tandis que l'effet de matching semble être faible.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2001s-21.

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Date of creation: 01 Mar 2001
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Handle: RePEc:cir:cirwor:2001s-21

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Keywords: Unemployment insurance; job matching; unemployment duration; job duration; Assurance-chômage; matching de l'emploi; durée du chômage; durée de l'emploi;

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References

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  1. John C. Ham & Samuel Rea, 1986. "Unemployment Insurance and Male Unemployment Duration in Canada," Working Papers 592, Princeton University, Department of Economics, Industrial Relations Section..
  2. Michael Baker & Samuel A. Rea, Jr., 1994. "Employment Spells and Unemployment Insurance Eligibility Requirements," Working Papers reas-95-02, University of Toronto, Department of Economics.
  3. Han, Aaron & Hausman, Jerry A, 1990. "Flexible Parametric Estimation of Duration and Competing Risk Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(1), pages 1-28, January-M.
  4. Hansen, G.D. & Imrohoroglu, A., 1990. "The Role Of Unemployment Insurance In An Economy With Liquidity Constraints And Moral Hazard," Papers 21, California Los Angeles - Applied Econometrics.
  5. Christofides, Louis N & McKenna, C J, 1996. "Unemployment Insurance and Job Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 286-312, April.
  6. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  7. Belzil, Christian, 1995. "Unemployment Insurance and Unemployment over Time: An Analysis with Event History Data," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 113-26, February.
  8. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  9. Kathleen P. Classen, 1977. "The effect of unemployment insurance on the duration of unemployment and subsequent earnings," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 438-444, July.
  10. Belzil, Christian, 1996. "Relative Efficiencies and Comparative Advantages in Job Search," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 154-73, January.
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Citations

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Cited by:
  1. Gangl, Markus, 2002. "Welfare state stabilization of employment careers: unenployement benefits and job histories in the United States and West Germany," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 02-207, Social Science Research Center Berlin (WZB).
  2. Uhlendorff, Arne & Zimmermann, Klaus F, 2006. "Unemployment Dynamics among Migrants and Natives," CEPR Discussion Papers 5872, C.E.P.R. Discussion Papers.
  3. Konstantinos Tatsiramos, 2009. "Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1225-1260, December.
  4. Marco Caliendo & Steffen Künn & Arne Uhlendorff, 2012. "Marginal Employment, Unemployment Duration and Job Match Quality," Discussion Papers of DIW Berlin 1222, DIW Berlin, German Institute for Economic Research.
  5. Gangl, Markus, 2002. "Unemployment benefits as a search subsidy: new evidence on duration and wage effects of unemployment insurance," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 02-208, Social Science Research Center Berlin (WZB).
  6. Gaure, Simen & Røed, Knut & Westlie, Lars, 2012. "Job search incentives and job match quality," Labour Economics, Elsevier, vol. 19(3), pages 438-450.
  7. Tatsiramos, Konstantinos, 2004. "The Effect of Unemployment Insurance on Unemployment Duration and the Subsequent Employment Stability," IZA Discussion Papers 1163, Institute for the Study of Labor (IZA).
  8. Talarowski, David, 2012. "Estimation des élasticités du modèle de recherche d'emploi sur données françaises
    [Estimation of the elasticities of the model of job search on French data]
    ," MPRA Paper 38366, University Library of Munich, Germany.

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