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Age discontinuity and nonemployment benefit policy evaluation through the lens of job search theory

Author

Listed:
  • Bruno Decreuse

    (Aix-Marseille University)

  • Guillaume Wilemme

    (Aix-Marseille University)

Abstract

A recent strand of papers use sharp regression discontinuity designs (RDD) based on age discontinuity to study the impacts of minimum income and unemployment insurance benefit extension policies. This design challenges job search theory, which predicts that such RDD estimates are biased. Owing to market frictions, people below the age threshold account for future eligibility to the policy. This progressively affects their search outcomes as they get closer to entitlement. Comparing them to eligible people leads to biased estimates because both groups of workers are actually treated. We provide a nonstationary job search model and illustrate the theoretical biaseson the datasets used in the literature. Our results suggest that the employment impact of minimum income policies are (significantly) under-estimated, whereas the impacts of benefit extensions on nonemployment duration are (not significantly) over-estimated.

Suggested Citation

  • Bruno Decreuse & Guillaume Wilemme, 2019. "Age discontinuity and nonemployment benefit policy evaluation through the lens of job search theory," 2019 Meeting Papers 890, Society for Economic Dynamics.
  • Handle: RePEc:red:sed019:890
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    References listed on IDEAS

    as
    1. Hairault, Jean-Olivier & Langot, François & Ménard, Sébastien & Sopraseuth, Thepthida, 2012. "Optimal unemployment insurance for older workers," Journal of Public Economics, Elsevier, vol. 96(5), pages 509-519.
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    6. Gerard Van Den Berg & Antoine Bozio & Monica Costa Dias, 2013. "Policy discontinuity and duration outcomes," IFS Working Papers W13/27, Institute for Fiscal Studies.
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    8. Guido Menzio & Irina Telyukova & Ludo Visschers, 2016. "Directed Search over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 38-62, January.
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    More about this item

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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