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Why Is There a Spike in the Job Finding Rate at Benefit Exhaustion?

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  • Boone, Jan

    () (Tilburg University)

  • van Ours, Jan C.

    () (Erasmus University Rotterdam)

Abstract

Putting a limit on the duration of unemployment benefits tends to introduce a "spike" in the job finding rate shortly before benefits are exhausted. Current theories explain this spike from workers’ behavior. We present a theoretical model in which also the nature of the job matters. End-of-benefit spikes in job finding rates are related to optimizing behavior of unemployed workers who rationally assume that employers will accept delays in the starting date of a new job, especially if these jobs are permanent. We use a dataset on Slovenian unemployment spells to test this prediction and find supporting evidence. We conclude that the spike in the job finding rate suggests that workers exploit unemployment insurance benefits for subsidized leisure.

Suggested Citation

  • Boone, Jan & van Ours, Jan C., 2009. "Why Is There a Spike in the Job Finding Rate at Benefit Exhaustion?," IZA Discussion Papers 4523, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4523
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    References listed on IDEAS

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    Cited by:

    1. Steffen Altmann & Armin Falk & Simon Jäger & Florian Zimmermann, 2015. "Learning about Job Search: A Field Experiment with Job Seekers in Germany," Working Paper 254671, Harvard University OpenScholar.
    2. repec:spr:empeco:v:54:y:2018:i:3:d:10.1007_s00181-017-1236-3 is not listed on IDEAS
    3. Arash Nekoei & Andrea Weber, 2017. "Does Extending Unemployment Benefits Improve Job Quality?," American Economic Review, American Economic Association, vol. 107(2), pages 527-561, February.
    4. Immervoll, Herwig, 2009. "Minimum-Income Benefits in OECD Countries: Policy Design, Effectiveness and Challenges," IZA Discussion Papers 4627, Institute for the Study of Labor (IZA).
    5. 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.
    6. Rafael Lalive & Analía Schlosser & Andreas Steinhauer & Josef Zweimüller, 2014. "Parental Leave and Mothers' Careers: The Relative Importance of Job Protection and Cash Benefits," Review of Economic Studies, Oxford University Press, vol. 81(1), pages 219-265.
    7. Bart Cockx & Eva Van Belle, 2016. "Waiting Longer Before Claiming And Activating Youth. No Point?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 16/922, Ghent University, Faculty of Economics and Business Administration.
    8. Marco Caliendo & Konstantinos Tatsiramos & Arne Uhlendorff, 2013. "Benefit Duration, Unemployment Duration And Job Match Quality: A Regression‐Discontinuity Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 604-627, June.
    9. Milan Vodopivec, 2013. "Introducing unemployment insurance to developing countries," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-23, December.
    10. Rebollo-Sanz, Yolanda, 2012. "Unemployment insurance and job turnover in Spain," Labour Economics, Elsevier, vol. 19(3), pages 403-426.
    11. Cockx, Bart & Dejemeppe, Muriel, 2010. "The Threat of Monitoring Job Search: A Discontinuity Design," IZA Discussion Papers 5337, Institute for the Study of Labor (IZA).
    12. Yolanda F. Rebollo-Sanz & José Ignacio García-Pérez, 2013. "Are there gains in employment stability by reducing unemployment benefit entitlement length? The case of Spain," Working Papers 13.03, Universidad Pablo de Olavide, Department of Economics.
    13. Bruno Coquet, 2017. "Les allocations chômage devraient-elles être dégressives ?," Documents de Travail de l'OFCE 2017-01, Observatoire Francais des Conjonctures Economiques (OFCE).
    14. 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.
    15. Kyyrä, Tomi & Pesola, Hanna & Verho, Jouko Kullervo, 2017. "The Spike at Benefit Exhaustion in the Finnish Labor Market," IZA Discussion Papers 10798, Institute for the Study of Labor (IZA).
    16. Parsons, Donald O., 2014. "Job Displacement Insurance: An Overview," IZA Discussion Papers 8223, Institute for the Study of Labor (IZA).
    17. Regev, Tali, 2012. "Unemployment compensation under partial program coverage," Labour Economics, Elsevier, vol. 19(6), pages 888-897.
    18. 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.
    19. Kahn, Lawrence M., 2012. "Temporary jobs and job search effort in Europe," Labour Economics, Elsevier, vol. 19(1), pages 113-128.
    20. De Groot, Nynke & van der Klaauw, Bas, 2014. "The Effects of Reducing the Entitlement Period to Unemployment Insurance Benefits," IZA Discussion Papers 8336, Institute for the Study of Labor (IZA).
    21. Stefano DellaVigna & Attila Lindner & Balázs Reizer & Johannes F. Schmieder, 2017. "Reference-Dependent Job Search: Evidence from Hungary," The Quarterly Journal of Economics, Oxford University Press, vol. 132(4), pages 1969-2018.
    22. vom Berge, Philipp & Klingert, Isabell & Becker, Sebastian & Lenhart, Julia & Trenkle, Simon & Umkehrer, Matthias, 2016. "Mindestlohnbegleitforschung - Überprüfung der Ausnahmeregelung für Langzeitarbeitslose : Forschungsauftrag des Bundesministeriums für Arbeit und Soziales (BMAS)," IAB-Forschungsbericht 201608, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    unemployment benefits; spikes;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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