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Unemployment Insurance, Recall Expectations, And Unemployment Outcomes

  • Lawrence F. Katz
  • Bruce D. Meyer

This paper shows the importance of explicitly accounting for the possibility of recalls when analyzing the determinants of unemployment spell durations and the effects of unemployment insurance (UI) on unemployment outcomes in the United States. These issues are examined using a unique sample of UI recipients from Missouri and Pennsylvania covering unemployment spells in the 1979- 1981 period. We find that those expecting recall who are not recalled tend to have quite long unemployment spells. Furthermore, ex-ante temporary layoff spells (the spells of individuals' who initially expect to be recalled) may account for over 60 percent of the unemployment of UI recipients and appear to account for much more unemployment than ex-post temporary layoff spells (spells actually ending in recall). We estimate a competing risks model in which the finding of a new job and recall are treated as alternate routes of leaving unemployment. Our results using this approach show that the recall and new job exit probabilities have quite different time patterns and are often affected in opposite ways by explanatory variables. We also find that the probability of leaving unemployment (both through recalls and new job finding) increases greatly around the time that UI benefits lapse.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2594.

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Date of creation: May 1988
Date of revision:
Publication status: published as The Quarterly Journal of Economics, Vol. 105, pp. 973-1002, (November 1990) .
Handle: RePEc:nbr:nberwo:2594
Note: LS
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  1. Martin S. Feldstein, 1975. "The Importance of Temporary Layoffs: An Empirical Analysis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(3), pages 725-745.
  2. Kenneth Burdett & Dale T. Mortensen, 1977. "Labor Supply Under Uncertainty," Discussion Papers 297, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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