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Unemployment Durations and Extended Unemployment Benefits in Local Labor Markets

Author

Listed:
  • Stepan Jurajda

    (CERGE-EI)

  • Frederick J. Tannery

    (Slippery Rock University ; University of Pittsburgh)

Abstract

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.

Suggested Citation

  • Stepan Jurajda & Frederick J. Tannery, 2001. "Unemployment Durations and Extended Unemployment Benefits in Local Labor Markets," Labor and Demography 0012006, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0012006
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    References listed on IDEAS

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    1. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    2. McCall, Brian P, 1996. "Unemployment Insurance Rules, Joblessness, and Part-Time Work," Econometrica, Econometric Society, vol. 64(3), pages 647-682, May.
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    4. 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.
    5. Christopher A. Pissarides, 1982. "Job Search and the Duration of Layoff Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 595-612.
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    7. Gerard J. van den Berg, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 255-277.
    8. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 325-353, July.
    9. 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.
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    11. 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.
    12. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
    13. 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.
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    Cited by:

    1. Matthew Webb & Arthur Sweetman & Casey Warman, 2014. "How Targeted is Targeted Tax Relief? Evidence from the Unemployment Insurance Youth Hires Program," Working Papers 1298, Queen's University, Department of Economics.
    2. Li, Xianghong & Smith, Barry, 2015. "Diagnostic analysis and computational strategies for estimating discrete time duration models—A Monte Carlo study," Journal of Econometrics, Elsevier, vol. 187(1), pages 275-292.
    3. repec:prg:jnlpol:v:2017:y:2017:i:4:id:1157:p:501-519 is not listed on IDEAS
    4. Randall W. Eberts & Christopher J. O'Leary, 2003. "A New WPRS Profiling Model for Michigan," Book chapters authored by Upjohn Institute researchers,in: Joshua Riley & Aquila Branch & Stephen Wandner & Wayne Gordon (ed.), A Compilation of Selected Papers from the Employment and Training Administration's 2003 Biennial National Research Conference, ETA Occasional Paper 20, pages 130-184 W.E. Upjohn Institute for Employment Research.
    5. Polachek, Solomon & Xiang, Jun, 2005. "The Effects of Incomplete Employee Wage Information: A Cross-Country Analysis," IZA Discussion Papers 1735, Institute for the Study of Labor (IZA).
    6. Hakola, Tuulia, 2000. "Navigating through the Finnish Pension System," Discussion Papers 224, VATT Institute for Economic Research.

    More about this item

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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