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Labor force participation, job search effort and unemployment insurance in the laboratory

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  • Lechthaler, Wolfgang
  • Ring, Patrick

Abstract

How the provision of unemployment benefits affects employment is a debated issue. We aim at complementing theoretical and empirical contributions to this debate with a laboratory experiment. We simulate a job market with search effort and labor force participation decisions while varying the maximum length of unemployment benefit eligibility. Our results reveal two separable, opposing effects. Individuals within the labor force search with lower effort when unemployment benefits are more generous. However, individuals are more likely to participate in the labor force and to actively search for a job.

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  • Lechthaler, Wolfgang & Ring, Patrick, 2021. "Labor force participation, job search effort and unemployment insurance in the laboratory," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 748-778.
    • Handle: RePEc:eee:jeborg:v:189:y:2021:i:c:p:748-778
    DOI: 10.1016/j.jebo.2021.06.048
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    JEL classification:

    • E70 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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