On the spike in hazard rates at unemployment benefit expiration: The signalling hypothesis revisited
AbstractWe revisit the signalling hypothesis, whereby potential employers use the duration of unemployment as a signal as to the productivity of applicants. We suggest that the quality of sucha signal is very low when the unemployed receive unemployment benefits: individuals have good reasons to remain unemployed. Conversely, the signal becomes much more efficient once benefitshave elapsed: skilled workers should not stay unemployed in such cases. Therefore, the potential duration of unemployment benefits should drive employers.expectations and their recruitmentpractices. This mechanism can explain why hazards fall after benefit expiration, and why hazards respond more to the potential duration of benefits than to replacement rates.
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Date of creation: 17 Nov 2008
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Worker heterogeneity; Signalling; Hazard rate; Unemployment compensation; Moral hazard;
Other versions of this item:
- Decreuse, Bruno & Kazbakova, Elvira, 2008. "On the spike in hazard rates at unemployment benefit expiration: The signalling hypothesis revisited," MPRA Paper 11223, University Library of Munich, Germany.
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- 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.
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