Implications of the Illinois Reemployment Bonus Experiments For Theories of Unemployment and Policy Design
Reemployment bonus experiments offer large lump sum payments to unemployment insurance (UI) recipients who find a job quickly. Such experiments are underway or have been recently completed in four states. This paper analyzes the results from Illinois and discusses the implications of the experiments for theories of unemployment and policy design. I examine the hazard rate of exit from unemployment and find that it is significantly higher for the experimental groups, but only during the period of bonus eligibility. Both labor supply and search theories of unemployment are shown to suggest a rise in the reemployment hazard just before the end of bonus eligibility and to suggest larger effects of the fixed amount bonus for lower income groups. Only weak support is found for these hypotheses, which suggests limitations of the models of unemployment. Some modifications of the models are suggested. The experiments demonstrate the effects of economic incentives on job finding behavior but they do not show the desirability of a permanent reemployment bonus program. Evidence from another sample suggests that as many as half of those who received a reemployment bonus returned to their previous employer, so that a bonus program that pays people returning to their last employer would provide a strong encouragement to temporary layoffs. A discussion of UI claim filing behavior suggests that a permanent program could well increase the frequency or promptness of filing, thus reducing any financial advantages of a bonus program
|Date of creation:||Dec 1988|
|Date of revision:|
|Publication status:||published as Journal of Labor Economics, 14, Jan 1996, pp 26-51.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ashenfelter, Orley, 1980.
"Unemployment as Disequilibrium in a Model of Aggregate Labor Supply,"
Econometric Society, vol. 48(3), pages 547-64, April.
- Orley Ashenfelter, 1977. "Unemployment as Disequilibrium in a Model of Aggregate Labor Supply," Working Papers 484, Princeton University, Department of Economics, Industrial Relations Section..
- Rebecca Blank & David Card & Whitney Newey, 1988.
"Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?,"
623, Princeton University, Department of Economics, Industrial Relations Section..
- Rebecca M. Blank & David E. Card, 1991. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1157-1189.
- Rebecca M. Blank & David Card, 1989. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," NBER Working Papers 2871, National Bureau of Economic Research, Inc.
- Lawrence F. Katz & Bruce D. Meyer, 1990.
"Unemployment Insurance, Recall Expectations, and Unemployment Outcomes,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 105(4), pages 973-1002.
- Lawrence F. Katz & Bruce D. Meyer, 1988. "Unemployment Insurance, Recall Expectations, And Unemployment Outcomes," NBER Working Papers 2594, National Bureau of Economic Research, Inc.
- Frank Brechling, 1981. "Layoffs and Unemployment Insurance," NBER Chapters, in: Studies in Labor Markets, pages 187-208 National Bureau of Economic Research, Inc.
- Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, vol. 73(4), pages 541-59, September.
- Shavell, Steven & Weiss, Laurence, 1979.
"The Optimal Payment of Unemployment Insurance Benefits over Time,"
Journal of Political Economy,
University of Chicago Press, vol. 87(6), pages 1347-62, December.
- Steven Shavell & Laurence Weiss, 1978. "The Optimal Payment of Unemployment Insurance Benefits over Time," Cowles Foundation Discussion Papers 503, Cowles Foundation for Research in Economics, Yale University.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2783. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.