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

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  • Jurajda, Štepán

    ()
    (CERGE-EI)

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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Bibliographic Info

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

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Length: 46 pages
Date of creation: May 2001
Date of revision:
Publication status: published in: Journal of Econometrics, 2002, 108(2), 227-252
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. Haltiwanger, John, 1984. "The Distinguishing Characteristics of Temporary and Permanent Layoffs," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 2(4), pages 523-38, October.
  2. Burdett, Kenneth & Hool, Bryce, 1983. "Layoffs, wages and unemployment insurance," Journal of Public Economics, Elsevier, Elsevier, vol. 21(3), pages 325-357, August.
  3. Patricia M. Anderson & Bruce D. Meyer, 1994. "The Effects of Unemployment Insurance Taxes and Benefits on Layoffs Using Firm and Individual Data," NBER Working Papers 4960, National Bureau of Economic Research, Inc.
  4. Stepan Jurajda, 2003. "Unemployment Insurance and the Timing of Layoffs and Recalls," LABOUR, CEIS, CEIS, vol. 17(3), pages 383-389, 09.
  5. Peter Schmidt & Ann Dryden Witte, 1987. "Predicting Criminal Recidivism Using "Split Population" Survival Time Models," NBER Working Papers 2445, National Bureau of Economic Research, Inc.
  6. Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 541-59, September.
  7. Christofides, Louis N & McKenna, C J, 1996. "Unemployment Insurance and Job Duration in Canada," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(2), pages 286-312, April.
  8. David Card & Phillip B. Levine, 1992. "Unemployment Insurance Taxes and the Cyclical and Seasonal Properties of Unemployment," NBER Working Papers 4030, National Bureau of Economic Research, Inc.
  9. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 5(3), pages 325-53, July.
  10. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, Econometric Society, vol. 52(2), pages 271-320, March.
  11. 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, Econometric Society, vol. 64(1), pages 175-205, January.
  12. Michael Baker & Rea Samuel A. Rea, 1995. "Employment Spells and Unemployment Insurance Eligibility Requirements," Labor and Demography, EconWPA 9505001, EconWPA.
  13. Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(6), pages 1246-60, December.
  14. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(5), pages 937-57, October.
  15. 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, Econometric Society, vol. 58(6), pages 1411-41, November.
  16. McCall, Brian P, 1996. "Unemployment Insurance Rules, Joblessness, and Part-Time Work," Econometrica, Econometric Society, Econometric Society, vol. 64(3), pages 647-82, May.
  17. Katz, Lawrence F & Meyer, Bruce D, 1990. "Unemployment Insurance, Recall Expectations, and Unemployment Outcomes," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(4), pages 973-1002, November.
  18. Rogers, Cynthia L, 1998. "Expectations of Unemployment Insurance and Unemployment Duration," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 16(3), pages 630-66, July.
  19. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  20. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  21. Baily, Martin Neil, 1977. "On the Theory of Layoffs and Unemployment," Econometrica, Econometric Society, Econometric Society, vol. 45(5), pages 1043-63, July.
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Citations

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Cited by:
  1. van Ours, Jan C. & Vodopivec, Milan, 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).
  2. Cockx, B. & Picchio, M., 2011. "Scarring Effects of Remaining Unemployed for Long-Term Unemployed School-Leavers," Discussion Paper, Tilburg University, Center for Economic Research 2011-094, Tilburg University, Center for Economic Research.
  3. 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, The World Bank 4031, The World Bank.
  4. Lalive, Rafael & Zweimüller, Josef, 2002. "Benefit Entitlement and the Labor Market: Evidence from a Large-Scale Policy Change," IZA Discussion Papers 444, Institute for the Study of Labor (IZA).
  5. Konstantinos Tatsiramos, 2009. "Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability," Journal of the European Economic Association, MIT Press, MIT Press, vol. 7(6), pages 1225-1260, December.
  6. 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).
  7. Barbara Petrongolo, 2007. "What Are the Long-Term Effects of UI? Evidence from the UK JSA Reform," CEP Discussion Papers, Centre for Economic Performance, LSE dp0841, Centre for Economic Performance, LSE.
  8. 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, Tilburg University, Center for Economic Research 2006-56, Tilburg University, Center for Economic Research.
  9. Simoes, Nadia, 2013. "Subsídio de desemprego: uma revisão da literatura teórica e empírica
    [Unemployment insurance: a survey]
    ," MPRA Paper 52332, University Library of Munich, Germany.
  10. Rebollo-Sanz, Yolanda, 2012. "Unemployment insurance and job turnover in Spain," Labour Economics, Elsevier, Elsevier, vol. 19(3), pages 403-426.
  11. Thomas Le Barbanchon, 2012. "The Effect of the Potential Duration of Unemployment Benefits on Unemployment Exits to Work and Match Quality in France," Working Papers, Centre de Recherche en Economie et Statistique 2012-21, Centre de Recherche en Economie et Statistique.
  12. 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).
  13. Stepan Jurajda & Daniel Münich, 2002. "Understanding Czech Long-Term Unemployment," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 498, William Davidson Institute at the University of Michigan.

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