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The Effects of Wealth, and Unemployment Benefits on Search Behavior and Labor Market Transitions

Author

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  • Tricia Gladden
  • Michelle Alexopoulos

Abstract

During the past decade, many researchers have examined the theoretical predictions of labor search models with endogenous job search intensity. For a risk adverse individual, search intensity depends on variables such as individual wealth and the level of unemployment benefits. Since wealth and unemployment benefits affect search intensity, they also affect the duration of unemployment spells. Although there are a small number of papers that empirically estimate the relationship between search intensity and unemployment benefits, none focus on the effects of savings on search intensity. This omission is primarily due to the lack of suitable datasets. To determine the effects of wealth and unemployment benefits on search intensity and unemployment duration, we estimate a simultaneous equation model of search intensity, reservation wages, labor market transitions and wealth using a sample from the 1984 Survey of Income and Program Participation. We examine whether wealth and unemployment insurance have different effects on the intensive search margin (the number of contacts) and the extensive search margin (the number of search methods). Our results yield insights into the effectiveness of different methods of search, the effect of the unemployment insurance benefits, and the magnitude of the discouraged worker effect in the U.S

Suggested Citation

  • Tricia Gladden & Michelle Alexopoulos, 2004. "The Effects of Wealth, and Unemployment Benefits on Search Behavior and Labor Market Transitions," Econometric Society 2004 North American Summer Meetings 517, Econometric Society.
  • Handle: RePEc:ecm:nasm04:517
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    File URL: http://repec.org/esNASM04/up.21558.1075578228.pdf
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    References listed on IDEAS

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    1. Rendon Sílvio, 2006. "Job Search And Asset Accumulation Under Borrowing Constraints ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 233-263, February.
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    7. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
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    Cited by:

    1. Francisco M. Gonzalez & Shouyong Shi, 2010. "An Equilibrium Theory of Learning, Search, and Wages," Econometrica, Econometric Society, vol. 78(2), pages 509-537, March.
    2. Ben Lodewijks, 2011. "Financial Constraints and Job Mobility in Australia," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 61-75, March.
    3. Can Rao & Jingwen Yu & Hongfei Zhu, 2015. "Land Ownership as an Urban Employment Disincentive for Rural Migrants in China," The Developing Economies, Institute of Developing Economies, vol. 53(2), pages 135-149, June.

    More about this item

    Keywords

    Labor Market Transitions; Search Behavior;

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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