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Unemployment Insurance and Subsequent Job Duration: Job Matching vs Unobserved Heterogeneity

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  • Christian Belzil

Abstract

The relationship between Unemployment Insurance (UI) benefit duration, unemployment duration and subsequent job duration is investigated using a multi-state duration model with state specific unobserved heterogeneity. I examine two potential explanations for the negative correlation between unemployment and job spell durations; UI benefits increase job matching quality (the Matching effect) vs unobserved heterogeneity (Adverse Selection). The Matching effect is found to be weak. Although new jobs accepted within 5 weeks of benefit termination seem to have a higher dissolution rate, the negative correlation between unemployment and job duration is mostly explained by unobserved heterogeneity. Various simulations indicate that increasing the maximum benefit duration by one week will raise expected unemployment duration by 1.0 to 1.5 days but will raise expected job duration by 0.5 to 0.8 days only. Dans cet article, j'analyse le lien entre la durée des prestations d'assurance-chômage, la durée du chômage et la durée de l'emploi subséquent. L'analyse est faite à l'aide d'un modèle de durée avec états multiples et hétérogénéité non-observée. ¸ l'aide du modèle, je tente de faire la distinction entre deux hypothèses possibles qui expliqueraient la corrélation négative entre durée de chômage et durée de l'emploi subséquent; la durée des prestations augmente la durée de l'emploi subséquent (un effet de matching), ou la corrélation négative est expliquée par la sélection adverse. Les résultats tendent à supporter l'hypothèse de sélection adverse tandis que l'effet de matching semble être faible.

Suggested Citation

  • Christian Belzil, 2001. "Unemployment Insurance and Subsequent Job Duration: Job Matching vs Unobserved Heterogeneity," CIRANO Working Papers 2001s-21, CIRANO.
  • Handle: RePEc:cir:cirwor:2001s-21
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    References listed on IDEAS

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    1. Belzil, Christian, 1996. "Relative Efficiencies and Comparative Advantages in Job Search," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 154-173, January.
    2. Christofides, Louis N & McKenna, C J, 1996. "Unemployment Insurance and Job Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 286-312, April.
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    4. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-142, February.
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    Cited by:

    1. Caliendo, Marco & Künn, Steffen & Uhlendorff, Arne, 2012. "Marginal Employment, Unemployment Duration and Job Match Quality," IZA Discussion Papers 6499, Institute for the Study of Labor (IZA).
    2. Tatsiramos, Konstantinos, 2004. "The Effect of Unemployment Insurance on Unemployment Duration and the Subsequent Employment Stability," IZA Discussion Papers 1163, Institute for the Study of Labor (IZA).
    3. Konstantinos Tatsiramos, 2009. "Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1225-1260, December.
    4. Yolanda Rebollo-Sanz & J. García-Pérez, 2015. "Are unemployment benefits harmful to the stability of working careers? The case of Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(1), pages 1-41, March.
    5. Stephanie Lluis & Brian McCall, 2017. "Part-Time Work and Crowding-Out Implications of Employment Insurance Pilot Initiatives," Working Papers 1701, University of Waterloo, Department of Economics, revised Jan 2017.
    6. Konstantinos Tatsiramos, 2014. "Unemployment benefits and job match quality," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-44, July.
    7. Arne Uhlendorff & Klaus F. Zimmermann, 2014. "Unemployment Dynamics among Migrants and Natives," Economica, London School of Economics and Political Science, vol. 81(322), pages 348-367, April.
    8. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    9. Caliendo, Marco & Künn, Steffen & Uhlendorff, Arne, 2016. "Earnings exemptions for unemployed workers: The relationship between marginal employment, unemployment duration and job quality," Labour Economics, Elsevier, vol. 42(C), pages 177-193.
    10. 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.
    11. Gangl, Markus, 2002. "Welfare state stabilization of employment careers: Unenployement benefits and job histories in the United States and West Germany," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 02-207, Social Science Research Center Berlin (WZB).
    12. van Ours, J.C. & Vodopivec, M., 2006. "Shortening the Potential Duration of Unemployment Benefits does not affect the Quality of Post-Unemployed Jobs : Evidence from a Natural Experiment," Discussion Paper 2006-56, Tilburg University, Center for Economic Research.
    13. Lachowska, Marta & Meral, Merve & Woodbury, Stephen A., 2016. "Effects of the unemployment insurance work test on long-term employment outcomes," Labour Economics, Elsevier, vol. 41(C), pages 246-265.
    14. Nagler, Paula, 2015. "The impact of unemployment insurance savings accounts on subsequent employment quality," MERIT Working Papers 026, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    15. Talarowski, David, 2012. "Estimation des élasticités du modèle de recherche d'emploi sur données françaises
      [Estimation of the elasticities of the model of job search on French data]
      ," MPRA Paper 38366, University Library of Munich, Germany.
    16. Gangl, Markus, 2002. "Unemployment benefits as a search subsidy: New evidence on duration and wage effects of unemployment insurance," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 02-208, Social Science Research Center Berlin (WZB).
    17. Vera Brenčič, 2010. "Do Employers Respond to the Costs of Continued Search?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(2), pages 221-245, April.
    18. Gaure, Simen & Røed, Knut & Westlie, Lars, 2012. "Job search incentives and job match quality," Labour Economics, Elsevier, vol. 19(3), pages 438-450.

    More about this item

    Keywords

    Unemployment insurance; job matching; unemployment duration; job duration; Assurance-chômage; matching de l'emploi; durée du chômage; durée de l'emploi;

    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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