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Unemployment Insurance and Reservation Wages: Evidence from Administrative Data

Listed author(s):
  • Thomas Le Barbanchon
  • Roland Rathelot
  • Alexandra Roulet

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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23406.

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Date of creation: May 2017
Publication status: published as Thomas Le Barbanchon & Roland Rathelot & Alexandra Roulet, 2017. "Unemployment insurance and reservation wages: Evidence from administrative data," Journal of Public Economics, .
Handle: RePEc:nbr:nberwo:23406
Note: LS PE
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  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.
  2. Sebastian Calonico & Matias D. Cattaneo & Rocio Titiunik, 2014. "Robust Nonparametric Confidence Intervals for Regression‚ÄźDiscontinuity Designs," Econometrica, Econometric Society, vol. 82, pages 2295-2326, November.
  3. Feldstein, Martin & Poterba, James, 1984. "Unemployment insurance and reservation wages," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 141-167.
  4. Rafael Lalive, 2007. "Unemployment Benefits, Unemployment Duration, and Post-Unemployment Jobs: A Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 97(2), pages 108-112, May.
  5. Alan B. Krueger & Andreas I. Mueller, 2016. "A Contribution to the Empirics of Reservation Wages," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 142-179, February.
  6. 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.
  7. Robert Shimer & Iv√°n Werning, 2007. "Reservation Wages and Unemployment Insurance," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1145-1185.
  8. Andreas Lichter, 2016. "Benefit Duration and Job Search Effort: Evidence from a Natural Experiment," NBER Chapters,in: Social Insurance Programs (Trans-Atlantic Public Economic Seminar - TAPES) National Bureau of Economic Research, Inc.
  9. Lichter, Andreas, 2016. "Benefit Duration and Job Search Effort: Evidence from a Natural Experiment," IZA Discussion Papers 10264, Institute for the Study of Labor (IZA).
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