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Unemployment Insurance and Unemployment: Implications of the Reemployment Bonus Experiments

  • Carl Davidson

    (Michigan State University)

  • Stephen A. Woodbury

    ()

    (W.E. Upjohn Institute for Employment Research)

We translate the results of the three reemployment bonus experiments that were conducted during the 1980s into (a) impacts of a 10-percentage point increase in the Unemployment Insurance (UI) replacement rate on the expected duration of unemployment; and (b) impacts of adding 1 week to the potential duration of UI benefits on the expected duration of unemployment. Our approach is to use an equilibrium search and matching model, calibrated using data from the bonus experiments and secondary sources. The results suggest that a 10-percentage point increase in the UI replacement rate increases the expected duration of unemployment by .3 to 1.1 week (a range consistent with, but only somewhat narrower than, the existing range of estimates), and that adding 1 week to the potential duration of UI benefits increases the expected duration of unemployment by .05 to .2 week (which is toward the low end of existing estimates).

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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 96-44.

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Date of creation: Apr 1996
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Handle: RePEc:upj:weupjo:96-44
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  1. Phanindra Wunnava & Syed Ali Raza Mehdi, 1994. "The effect of unemployment insurance on unemployment rate and average duration: evidence from pooled cross-sectional time-series data," Applied Economics Letters, Taylor & Francis Journals, vol. 1(7), pages 114-118.
  2. Stephen A. Woodbury & Robert G. Spiegelman, . "Bonuses to Workers and Employers to Reduce unemployment: Randomized Trials in Illinois," Upjohn Working Papers and Journal Articles sawrgs1987, W.E. Upjohn Institute for Employment Research.
  3. Arlene Holen, 1977. "Effects of unemployment insurance entitlement on duration and job search outcome," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 445-450, July.
  4. Kim B. Clark & Lawrence H. Summers, 1982. "Unemployment Insurance and Labor Force Transitions," NBER Working Papers 0920, National Bureau of Economic Research, Inc.
  5. John C. Ham & Samuel Rea, 1986. "Unemployment Insurance and Male Unemployment Duration in Canada," Working Papers 592, Princeton University, Department of Economics, Industrial Relations Section..
  6. Lawrence F. Katz & Bruce D. Meyer, 1988. "The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment," NBER Working Papers 2741, National Bureau of Economic Research, Inc.
  7. Davidson, Carl & Woodbury, Stephen A, 1993. "The Displacement Effect of Reemployment Bonus Programs," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 575-605, October.
  8. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  9. Carl Davidson & Stephen A. Woodbury, 2000. "Wage-Rate Subsidies for Dislocated Workers," Book chapters authored by Upjohn Institute researchers, in: Laurie J. Bassi & Stephen A. Woodbury (ed.), Long-term Unemployment and Reemployment Policies, pages 141-184 W.E. Upjohn Institute for Employment Research.
  10. Moffitt, Robert & Nicholson, Walter, 1982. "The Effect of Unemployment Insurance on Unemployment: The Case of Federal Supplemental Benefits," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 1-11, February.
  11. Wood Júnior, Thomaz, 1995. "Workers," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 35(2), January.
  12. 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.
  13. 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.
  14. Ehrenberg, Ronald G & Oaxaca, Ronald L, 1976. "Unemployment Insurance, Duration of Unemployment, and Subsequent Wage Gain," American Economic Review, American Economic Association, vol. 66(5), pages 754-66, December.
  15. Christopher J. O'Leary & Robert G. Spiegelman & Kenneth J. Kline, . "Do Bonus Offers Shorten Unemployment Insurance Spells? Results from the Washington Experiment," Upjohn Working Papers and Journal Articles cjo19954, W.E. Upjohn Institute for Employment Research.
  16. Gary Solon, 1982. "Work Incentive Effects of Taxing Employment Benefits," Working Papers 529, Princeton University, Department of Economics, Industrial Relations Section..
  17. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
  18. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  19. Phillip B. Levine, 1993. "Spillover Effects between the Insured and Uninsured Unemployed," ILR Review, Cornell University, ILR School, vol. 47(1), pages 73-86, October.
  20. Atkinson, A. B. & Gomulka, J. & Micklewright, J. & Rau, N., 1984. "Unemployment benefit, duration and incentives in Britain : How robust is the evidence?," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 3-26.
  21. Robert G. Spiegelman & Stephen A. Woodbury, 1990. "Controlled Experiments and the Unemployment Insurance System," Book chapters authored by Upjohn Institute researchers, in: W. Lee Hansen & James F. Byers (ed.), Unemploymenmt Insurance: the Second Half-Century, pages 355-392 W.E. Upjohn Institute for Employment Research.
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