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Does Extending Unemployment Benefits Improve Job Quality?

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  • Weber, Andrea
  • Nekoei, Arash

Abstract

Contrary to standard search model predictions, prior studies failed to estimate a positive effect of unemployment insurance (UI) on reemployment wages. This paper estimates a positive UI wage effect exploiting an age-based regression discontinuity in Austrian administrative data. A search model incorporating duration dependence determines the UI wage effect as the balance between two offsetting forces: UI causes agents to seek higher-wage jobs, but also reduces wages by lengthening unemployment. This implies a negative relationship between the UI unemployment duration and wage effects, which holds empirically both in our sample and across studies, reconciling disparate wage-effect estimates. Empirically, UI raises wages by improving reemployment firms? quality and attenuating wage drops.

Suggested Citation

  • Weber, Andrea & Nekoei, Arash, 2015. "Does Extending Unemployment Benefits Improve Job Quality?," CEPR Discussion Papers 10568, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10568
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    Keywords

    Job search; Regression discontinuity design; Unemployment insurance; Wages;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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