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The Displacement Effect of Reemployment Bonus Programs

Author

Listed:
  • Carl Davidson

    (Michigan State University)

  • Stephen A. Woodbury

    (W.E. Upjohn Institute for Employment Research)

Abstract

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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Suggested Citation

  • Carl Davidson & Stephen A. Woodbury, 1990. "The Displacement Effect of Reemployment Bonus Programs," Upjohn Working Papers and Journal Articles 90-02, W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:weupjo:90-02
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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. repec:fth:prinin:242 is not listed on IDEAS
    3. repec:mpr:mprres:856 is not listed on IDEAS
    4. 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.
    5. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-979, December.
    6. Stephen A. Woodbury, 2009. "Unemployment," Chapters, in: Kenneth G. Dau-Schmidt & Seth D. Harris & Orly Lobel (ed.), Labor and Employment Law and Economics, chapter 17, Edward Elgar Publishing.
    7. Pissarides, C A, 1984. "Efficient Job Rejection," Economic Journal, Royal Economic Society, vol. 94(376a), pages 97-108, Supplemen.
    8. Kim B. Clark & Lawrence H. Summers, 1982. "Unemployment Insurance and Labor Force Transitions," NBER Working Papers 0920, National Bureau of Economic Research, Inc.
    9. Seater, John J, 1979. "Job Search and Vacancy Contacts," American Economic Review, American Economic Association, vol. 69(3), pages 411-419, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    earnings; unemployment; insurance; reemployment; bonus; Woodbury; Davidson;
    All these keywords.

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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