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Unemployment Insurance and Reservation Wages: Evidence from Administrative Data

In: Social Insurance Programs (Trans-Atlantic Public Economics Seminar, TAPES)

Author

Listed:
  • Thomas Le Barbanchon
  • Roland Rathelot
  • Alexandra Roulet

Abstract

Although the reservation wage plays a central role in job search models, empirical evidence on the determinants of reservation wages, including key policy variables such as unemployment insurance (UI), is scarce. In France, unemployed people must declare their reservation wage to the Public Employment Service when they register to claim UI benefits. We take advantage of these rich French administrative data and of a reform of UI rules to estimate the effect of the potential benefit duration (PBD) on reservation wages and on other dimensions of job selectivity, using a difference-in-difference strategy. We cannot reject that the elasticity of the reservation wage with respect to PBD is zero. Our results are precise and we can rule out elasticities larger than 0.006. Furthermore, we do not find any significant effects of PBD on the desired number of hours, duration of labor contract and commuting time/distance. The estimated elasticity of actual benefit duration with respect to PBD of 0.3 is in line with the consensus in the literature. Exploiting a regression discontinuity design as an alternative identification strategy, we find similar results.
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Suggested Citation

  • Thomas Le Barbanchon & Roland Rathelot & Alexandra Roulet, 2016. "Unemployment Insurance and Reservation Wages: Evidence from Administrative Data," NBER Chapters, in: Social Insurance Programs (Trans-Atlantic Public Economics Seminar, TAPES), National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:13818
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    References listed on IDEAS

    as
    1. David Card & Raj Chetty & Andrea Weber, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," American Economic Review, American Economic Association, vol. 97(2), pages 113-118, May.
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    18. repec:cep:cepdps:dp1319 is not listed on IDEAS
    19. Le Barbanchon, Thomas, 2016. "The effect of the potential duration of unemployment benefits on unemployment exits to work and match quality in France," Labour Economics, Elsevier, vol. 42(C), pages 16-29.
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    Cited by:

    1. Paul Brandily & Camille Hémet & Clément Malgouyres, 2020. "Understanding the Reallocation of Displaced Workers to Firms," PSE Working Papers halshs-03082302, HAL.
    2. Simon Jäger & Benjamin Schoefer & Samuel Young & Josef Zweimüller, 2020. "Wages and the Value of Nonemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 135(4), pages 1905-1963.
    3. John J. Conlon & Laura Pilossoph & Matthew Wiswall & Basit Zafar, 2018. "Labor Market Search With Imperfect Information and Learning," NBER Working Papers 24988, National Bureau of Economic Research, Inc.
    4. Stefano DellaVigna & Jörg Heining & Johannes F. Schmieder & Simon Trenkle, 2020. "Evidence on Job Search Models from a Survey of Unemployed Workers in Germany," NBER Working Papers 27037, National Bureau of Economic Research, Inc.
    5. Lichter, Andreas & Schiprowski, Amelie, 2021. "Benefit duration, job search behavior and re-employment," Journal of Public Economics, Elsevier, vol. 193(C).
    6. Benjamin Schoefer, 2018. "Marginal Jobs and Job Surplus: Evidence from Separations and Unemployment Insurance," 2018 Meeting Papers 1309, Society for Economic Dynamics.
    7. Mui, Preston & Schoefer, Benjamin, 2019. "The Aggregate Labor Supply Curve at the Extensive Margin: A Reservation Wedge Approach," CEPR Discussion Papers 14209, C.E.P.R. Discussion Papers.
    8. B. Boutchenik & R. Lardeux, 2020. "The Take-Up of Unemployment Benefit Extensions," Documents de Travail de l'Insee - INSEE Working Papers g2020-02, Institut National de la Statistique et des Etudes Economiques.
    9. Camarero Garcia, Sebastian & Murmann, Martin, 2020. "Unemployment benefit duration and startup success," ZEW Discussion Papers 20-033, ZEW - Leibniz Centre for European Economic Research.
    10. Braun, Christine & Engelhardt, Bryan & Griffy, Benjamin & Rupert, Peter, 2020. "Testing the independence of job arrival rates and wage offers," Labour Economics, Elsevier, vol. 63(C).
    11. 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.

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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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