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Unemployment Insurance and Unemployment: Implications of the Reemployment Bonus Experiments

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Author Info
Carl Davidson (Michigan State University)
Stephen A. Woodbury () (W.E. Upjohn Institute for Employment Research)

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Abstract

We translate the results of the three reemployment bonus experiments that were conducted during the 1980s into (a) impacts of a 10-percentage point increase in the Unemployment Insurance (UI) replacement rate on the expected duration of unemployment; and (b) impacts of adding 1 week to the potential duration of UI benefits on the expected duration of unemployment. Our approach is to use an equilibrium search and matching model, calibrated using data from the bonus experiments and secondary sources. The results suggest that a 10-percentage point increase in the UI replacement rate increases the expected duration of unemployment by .3 to 1.1 week (a range consistent with, but only somewhat narrower than, the existing range of estimates), and that adding 1 week to the potential duration of UI benefits increases the expected duration of unemployment by .05 to .2 week (which is toward the low end of existing estimates).

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Publisher Info
Paper provided by W.E. Upjohn Institute for Employment Research in its series Staff Working Papers with number 96-44.

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Date of creation: Apr 1996
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Handle: RePEc:upj:weupjo:96-44

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Related research
Keywords: unemployment; insurance; bonus; experiments; Davidson; Woodbury;

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Find related papers by JEL classification:
J0 - Labor and Demographic Economics - - General
J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies

References listed on IDEAS
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. Blank, Rebecca M & Card, David E, 1991. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1157-89, November. [Downloadable!] (restricted)
    Other versions:
  2. Phillip B. Levine, 1993. "Spillover effects between the insured and uninsured unemployed," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 47(1), pages 73-86, October.
  3. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April. [Downloadable!] (restricted)
  4. Kim B. Clark & Lawrence H. Summers, 1984. "Unemployment Insurance and Labor Force Transitions," NBER Working Papers 0920, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Atkinson, A. B. & Gomulka, J. & Micklewright, J. & Rau, N., 1984. "Unemployment benefit, duration and incentives in Britain : How robust is the evidence?," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 3-26. [Downloadable!] (restricted)
  6. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July. [Downloadable!] (restricted)
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  7. Arlene Holen, 1977. "Effects of unemployment insurance entitlement on duration and job search outcome," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 30(4), pages 445-450, July.
  8. Wunnava, Phanindra V & Mehdi, Syed Ali Raza, 1994. "The Effect of Unemployment Insurance on Unemployment Rate and Average Duration: Evidence from Pooled Cross-Sectional Time-Series Data," Applied Economics Letters, Taylor and Francis Journals, vol. 1(7), pages 114-18, July. [Downloadable!] (restricted)
  9. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February. [Downloadable!] (restricted)
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  10. 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. [Downloadable!] (restricted)
  11. Ehrenberg, Ronald G & Oaxaca, Ronald L, 1976. "Unemployment Insurance, Duration of Unemployment, and Subsequent Wage Gain," American Economic Review, American Economic Association, vol. 66(5), pages 754-66, December. [Downloadable!] (restricted)
  12. Carl Davidson & Stephen A. Woodbury, 1995. "Wage Subsidies for Dislocated Workers," Staff Working Papers 95-31, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
  13. Moffitt, Robert & Nicholson, Walter, 1982. "The Effect of Unemployment Insurance on Unemployment: The Case of Federal Supplemental Benefits," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 1-11, February. [Downloadable!] (restricted)
  14. Davidson, Carl & Woodbury, Stephen A, 1993. "The Displacement Effect of Reemployment Bonus Programs," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 575-605, October. [Downloadable!] (restricted)
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  15. Woodbury, Stephen A & Spiegelman, Robert G, 1987. "Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois," American Economic Review, American Economic Association, vol. 77(4), pages 513-30, September. [Downloadable!] (restricted)
  16. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 325-53, July. [Downloadable!] (restricted)
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  17. Solon, Gary R, 1985. "Work Incentive Effects of Taxing Unemployment Benefits," Econometrica, Econometric Society, vol. 53(2), pages 295-306, March. [Downloadable!] (restricted)
    Other versions:
Full references

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. Carl Davidson & Stephen A. Woodbury, 1997. "The Optimal Dole with Risk Aversion, Job Destruction, and Worker Heterogeneity," Staff Working Papers 97-47, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
  2. Carl Davidson & Stephen A. Woodbury, 1995. "Optimal Unemployment Insurance," Staff Working Papers 95-35, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
    Other versions:
  3. Rodriguez-Planas, Nuria, 2004. "Re-Employment Bonuses in a Signalling Model of Temporary Layoffs," IZA Discussion Papers 1010, Institute for the Study of Labor (IZA). [Downloadable!]
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