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What Drives Wage Effects of Unemployment Benefits? Evidence from Natural Experiments and Reservation Wage Data

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  • Arni, Patrick

Abstract

How should we interpret wage effects of UI benefits? Policy conclusions are fundamentally different depending on whether the effects mostly operate through unemployment duration or through reservation wages. This paper combines for the first time all three necessary outcomes within the same natural experiments. We find reservation wage effects of about +1% per 20 days of extended potential benefit duration. Interestingly, the importance of the two channels of wage effects is age-dependent.

Suggested Citation

  • Arni, Patrick, 2017. "What Drives Wage Effects of Unemployment Benefits? Evidence from Natural Experiments and Reservation Wage Data," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168154, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc17:168154
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    File URL: https://www.econstor.eu/bitstream/10419/168154/1/VfS-2017-pid-2778.pdf
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    References listed on IDEAS

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    1. John T. Addison & Mário Centeno & Pedro Portugal, 2010. "Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped‐Down Job Search Approach," Economica, London School of Economics and Political Science, vol. 77(305), pages 46-59, January.
    2. Le Barbanchon, Thomas & Rathelot, Roland & Roulet, Alexandra, 2019. "Unemployment insurance and reservation wages: Evidence from administrative data," Journal of Public Economics, Elsevier, vol. 171(C), pages 1-17.
    3. Alan B. Krueger & Andreas I. Mueller, 2016. "A Contribution to the Empirics of Reservation Wages," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 142-179, February.
    4. Arni, Patrick, 2015. "Opening the Blackbox: How Does Labor Market Policy Affect the Job Seekers' Behavior? A Field Experiment," IZA Discussion Papers 9617, Institute of Labor Economics (IZA).
    5. Arash Nekoei & Andrea Weber, 2017. "Does Extending Unemployment Benefits Improve Job Quality?," American Economic Review, American Economic Association, vol. 107(2), pages 527-561, February.
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    Cited by:

    1. Kesternich, Iris & Schumacher, Heiner & Siflinger, Bettina & Valder, Franziska, 2022. "Reservation wages and labor supply," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 583-607.

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    More about this item

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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