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Unemployment Insurance and Reservation Wages: Evidence from Administrative Data

Author

Listed:
  • Barbanchon, Thomas Le

    (Bocconi University and CEPR)

  • Rathelot, Roland

    (University of Warwick and CEPR)

  • Roulet, Alexandra

    (Harvard University and INSEAD)

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.

Suggested Citation

  • Barbanchon, Thomas Le & Rathelot, Roland & Roulet, Alexandra, 2017. "Unemployment Insurance and Reservation Wages: Evidence from Administrative Data," CAGE Online Working Paper Series 330, Competitive Advantage in the Global Economy (CAGE).
    • Handle: RePEc:cge:wacage:330
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    unemployment insurance; reservation wage. JEL Classification: J64 J65;

    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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