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Unemployment Durations and Extended Unemployment Benefits in Local Labor Markets

  • Stepan Jurajda

    (CERGE-EI)

  • Frederick J. Tannery

    (Slippery Rock University ; University of Pittsburgh)

Extended unemployment benefits programs in the US are triggered by the state insured unemployment rate while intrastate demand conditions often vary dramatically. Some tight local labor markets may therefore exhibit a large adverse effect of extended unemployment benefits. Using a competing risk duration model, this paper measures the size of the entitlement effect across two labor markets facing dramatically different demand conditions. This exercise is important for evaluating potential benefits of proposed sub-state trigger extended benefits programs. The empirical results indicate that, in both recall and new job hazard, the entitlement effect is stronger in low unemployment labor markets. This finding is robust across a number of alternative specifications and econometric approaches. Implementing sub-state trigger extended benefits programs may therefore yield substantial benefits in terms of reducing the adverse incentives of unemployment insurance.

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File URL: http://128.118.178.162/eps/lab/papers/0012/0012006.pdf
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Paper provided by EconWPA in its series Labor and Demography with number 0012006.

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Length: 35 pages
Date of creation: 19 Feb 2001
Date of revision:
Handle: RePEc:wpa:wuwpla:0012006
Note: Type of Document - Acrobat PDF; pages: 35 ; figures: Included
Contact details of provider: Web page: http://128.118.178.162

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  1. Guido W. Imbens & Lisa M. Lynch, 1993. "Re-Employment Probabilities over the Business Cycle," NBER Working Papers 4585, National Bureau of Economic Research, Inc.
  2. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
  3. Mortensen, Dale T., 1987. "Job search and labor market analysis," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 15, pages 849-919 Elsevier.
  4. 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.
  5. McCall, B.P., 1993. "Unemployment Insurance Rules, Joblessness, and Part-Time Work," Papers 93-07, Minnesota - Industrial Relations Center.
  6. Ham, John C & LaLonde, Robert J, 1996. "The Effect of Sample Selection and Initial Conditions in Duration Models: Evidence from Experimental Data on Training," Econometrica, Econometric Society, vol. 64(1), pages 175-205, January.
  7. Anderson, Patricia M, 1992. "Time-Varying Effects of Recall Expectation, a Reemployment Bonus, and Job Counseling on Unemployment Durations," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 99-115, January.
  8. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  9. 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..
  10. van den Berg, Gerard J, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 255-77, April.
  11. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
  12. Han, Aaron & Hausman, Jerry A, 1990. "Flexible Parametric Estimation of Duration and Competing Risk Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(1), pages 1-28, January-M.
  13. Pissarides, Christopher A, 1982. "Job Search and the Duration of Layoff Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 595-612, November.
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