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The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?

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Author Info
David Card () (University of California, Berkeley and IZA)
Raj Chetty () (University of California, Berkeley)
Andrea Weber () (University of California, Berkeley IAS Vienna and IZA)

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Abstract

In this paper, we review the literature on the "spike" in unemployment exit rates around benefit exhaustion, and present new evidence based on administrative data for a large sample of job losers in Austria. We find that the way unemployment spells are measured has a large effect on the magnitude of the spike at exhaustion, both in existing studies and in our Austrian data. Spikes are typically much smaller when spell length is defined by the time to next job than when it is defined by the time spent on the unemployment system. In Austria, the exit rate from registered unemployment rises by over 200% at the expiration of benefits, while the hazard rate of re-employment rises by only 20%. The difference between the two measures arises because many individuals leave the unemployment register immediately after their benefits expire without returning to work. The modest spike in re-employment rates implies that most job seekers do not wait until their UI benefits are exhausted to return to work: fewer than 1% of jobless spells have an ending date that is manipulated to coincide with the expiration of UI benefits.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2590.

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Length: 33 pages
Date of creation: Jan 2007
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Handle: RePEc:iza:izadps:dp2590

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Related research
Keywords: unemployment duration; job search; unemployment insurance;

Other versions of this item:

Find related papers by JEL classification:
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings

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References listed on IDEAS
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    Other versions:
  2. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July. [Downloadable!] (restricted)
    Other versions:
  3. Emilia Del Bono & Andrea Weber, 2006. "Do Wages Compensate for Anticipated Working Time Restrictions? Evidence from Seasonal Employment in Austria," IZA Discussion Papers 2242, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. McCall, Brian P, 1997. "The Determinants of Full-Time versus Part-Time Reemployment Following Job Displacement," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 714-34, October. [Downloadable!] (restricted)
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  9. Bratberg, E. & Vaage, K., 2000. "Spell Durations with Long Unemployment Insurance Periods," Norway; Department of Economics, University of Bergen 208, Department of Economics, University of Bergen.
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  10. Card, D. & Riddell, W.C., 1996. "Unemployment in Canada and the United States: A Further Analysis," UBC Departmental Archives 96-09, UBC Department of Economics.
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  11. David Card & Raj Chetty & Andrea Weber, 2006. "Cash-on-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market," NBER Working Papers 12639, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Michele Pellizzari, 2004. "Unemployment Duration and the Interactions Between Unemployment Insurance and Social Assistance," Working Papers 272, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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  18. Bruce K. Fallick, 1989. "Unemployment Insurance and the Rate of Re-Employment of Displaced Workers," UCLA Economics Working Papers 550, UCLA Department of Economics. [Downloadable!]
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  20. van Ours, Jan C. & Vodopivec, Milan, 2004. "How Changes in Benefits Entitlement Affect Job-Finding: Lessons from the Slovenian "Experiment"," IZA Discussion Papers 1181, Institute for the Study of Labor (IZA). [Downloadable!]
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  23. repec:fth:prinin:352 is not listed on IDEAS
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Cited by:
(explanations, 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.)

  1. David E. Card & Jochen Kluve & Andrea Weber, 2009. "Active Labor Market Policy Evaluations: A Meta-analysis," NRN working papers 2009-02, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria. [Downloadable!]
    Other versions:
  2. Røed, Knut & Westlie, Lars, 2007. "Unemployment Insurance in Welfare States: Soft Constraints and Mild Sanctions," Memorandum 13/2007, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  3. Behaghel, Luc & Crépon, Bruno & Gurgand, Marc & Le Barbanchon, Thomas, 2009. "Sample Attrition Bias in Randomized Experiments: A Tale of Two Surveys," IZA Discussion Papers 4162, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Markussen, Simen & Roed, Knut & Røgeberg, Ole J. & Gaure, Simen, 2009. "The Anatomy of Absenteeism," IZA Discussion Papers 4240, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Ralf Wilke, . "Unemployment Duration in the United Kingdom: An Incomplete Data Approach," Discussion Papers 09/02, University of Nottingham, School of Economics. [Downloadable!]
  6. Petrongolo, Barbara, 2008. "The long-term effects of job search requirements: Evidence from the UK JSA reform," CEPR Discussion Papers 7067, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Gaure, Simen & Røed, Knut & Westlie, Lars, 2008. "The Impacts of Labor Market Policies on Job Search Behavior and Post-Unemployment Job Quality," Memorandum 22/2008, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  8. Bart Hobijn & Aysegül Sahin, 2007. "Job-finding and separation rates in the OECD," Staff Reports 298, Federal Reserve Bank of New York. [Downloadable!]
  9. Ott Toomet, 2008. "Threat Effect Of The Labour Market Programs In Denmark: Evidence From A Quasi-Experiment," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 62, Faculty of Economics and Business Administration, University of Tartu (Estonia). [Downloadable!]
  10. Krueger, Alan B. & Mueller, Andreas, 2008. "Job Search and Unemployment Insurance: New Evidence from Time Use Data," IZA Discussion Papers 3667, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Petrongolo, Barbara, 2008. "The Long-Term Effects of Job Search Requirements: Evidence from the UK JSA Reform," IZA Discussion Papers 3856, Institute for the Study of Labor (IZA). [Downloadable!]
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