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Estimating the Effect of Unemployment Insurance Compensation on the Labor Market Histories of Displaced Workers

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  • Jurajda, Stepán

    () (CERGE-EI, CEPR, WDI and IZA, Bonn)

Abstract

In this paper, U.S. data on labor market histories of displaced workers are used to quantify the effect of Unemployment Insurance Compensation (UIC) on both unemployment and employment durations. This results in the first available assessment of the effect that UIC has on the fraction of time spent employed. The estimation procedure simultaneously allows for unobserved heterogeneity, defective risks and sample selection into future spells, and uses alternative assumptions about agents’ knowledge of the UIC eligibility rules. Being entitled to UIC shortens workers’ employment durations. This negative effect on the fraction of time spent employed could be offset by suspending an extended benefits program in order to shorten unemployment durations.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 294.

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Length: 45 pages
Date of creation: May 2001
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Handle: RePEc:iza:izadps:dp294

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Keywords: Employment durations; unemployment insurance; unmeasured heterogeneity; defective risks; sample selection;

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References

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  1. John Haltiwanger, 1982. "The Distinguishing Characteristics of Temporary and Permanent Layoffs," UCLA Economics Working Papers 273, UCLA Department of Economics.
  2. 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.
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  9. Stepan Jurajda, 2003. "Unemployment Insurance and the Timing of Layoffs and Recalls," LABOUR, CEIS, Fondazione Giacomo Brodolini, vol. 17(3), pages 383-389, 09.
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  11. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-60, December.
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  13. Michael Baker & Rea Samuel A. Rea, 1995. "Employment Spells and Unemployment Insurance Eligibility Requirements," Labor and Demography 9505001, EconWPA.
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  17. Ham, John C & LaLonde, Robert J, 1996. "The Effect of Sample Selection and Initial Conditions in Duration Models: Evidence from Experimental Data on Training," Econometrica, Econometric Society, vol. 64(1), pages 175-205, January.
  18. Heckman, James J & Walker, James R, 1990. "The Relationship between Wages and Income and the Timing and Spacing of Births: Evidence from Swedish Longitudinal Data," Econometrica, Econometric Society, vol. 58(6), pages 1411-41, November.
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Citations

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Cited by:
  1. van Ours, Jan C. & Vodopivec, Milan, 2006. "Duration of unemployment benefits and quality of post-unemployment jobs : evidence from a natural experiment," Policy Research Working Paper Series 4031, The World Bank.
  2. Ours, J.C. van & Vodopivec, M., 2006. "Shortening the Potential Duration of Unemployment Benefits does not affect the Quality of Post-Unemployed Jobs: Evidence from a Natural Experiment," Discussion Paper 2006-56, Tilburg University, Center for Economic Research.
  3. 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).
  4. Stepan Jurajda & Daniel Münich, 2002. "Understanding Czech Long-Term Unemployment," William Davidson Institute Working Papers Series 498, William Davidson Institute at the University of Michigan.
  5. Cockx, B. & Picchio, M., 2011. "Scarring Effects of Remaining Unemployed for Long-Term Unemployed School-Leavers," Discussion Paper 2011-094, Tilburg University, Center for Economic Research.
  6. Barbara Petrongolo, 2007. "What Are the Long-Term Effects of UI? Evidence from the UK JSA Reform," CEP Discussion Papers dp0841, Centre for Economic Performance, LSE.
  7. Konstantinos Tatsiramos, 2006. "Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability," IZA Discussion Papers 2280, Institute for the Study of Labor (IZA).
  8. 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.
  9. Rafael Lalive & Josef Zweimüller, 2002. "Benefit Entitlement and the Labor Market: Evidence from a Large-Scale Policy Change," CESifo Working Paper Series 694, CESifo Group Munich.
  10. Jan C. van Ours & Milan Vodopivec, 2006. "Shortening the Potential Duration of Unemployment Benefits Does Not Affect the Quality of Post-Unemployment Jobs: Evidence from a Natural Experiment," IZA Discussion Papers 2171, Institute for the Study of Labor (IZA).

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