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The Displacement Effect of Reemployment Bonus Programs

  • Carl Davidson

    (Michigan State University)

  • Stephen A. Woodbury

    ()

    (W.E. Upjohn Institute for Employment Research)

The authors develop a partial equilibrium matching model of the labor market in order to examine whether adoption of a reemployment bonus would displace workers not offered the bonus. They examine the displacement effect for (1) unemployment-insurance-eligible workers who are offered but do not find a job in time to qualify for a bonus and (2) unemployment-insurance-ineligible workers who are never offered a bonus. The model predicts minimal displacement of the former group. But for the latter group, the model predicts an increase in unemployment duration of 0.2-0.4 week and an increase in unemployment of up to two per thousand. Copyright 1993 by University of Chicago Press.

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Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 90-02.

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Date of creation: Feb 1990
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Handle: RePEc:upj:weupjo:90-02
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  1. Stephen A. Woodbury, 2009. "Unemployment," Book chapters authored by Upjohn Institute researchers, in: Kenneth G. Dau-Schmidt & Seth D. Harris & Orley Lobel (ed.), Labor and Employment Law and Economics, volume 2, pages 480-516 W.E. Upjohn Institute for Employment Research.
    • Stephen A. Woodbury, 2009. "Unemployment," Chapters, in: Labor and Employment Law and Economics, chapter 17 Edward Elgar.
  2. Kim B. Clark & Lawrence H. Summers, 1982. "Unemployment Insurance and Labor Force Transitions," NBER Working Papers 0920, National Bureau of Economic Research, Inc.
  3. Pissarides, C A, 1984. "Efficient Job Rejection," Economic Journal, Royal Economic Society, vol. 94(376a), pages 97-108, Supplemen.
  4. Seater, John J, 1979. "Job Search and Vacancy Contacts," American Economic Review, American Economic Association, vol. 69(3), pages 411-19, June.
  5. Bruce D. Meyer, 1988. "Implications of the Illinois Reemployment Bonus Experiments For Theories of Unemployment and Policy Design," NBER Working Papers 2783, National Bureau of Economic Research, Inc.
  6. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  7. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
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