Does extending unemployment benefits improve job quality?

Arash Nekoei, Andrea Weber

Research output: Contribution to journalArticlepeer-review

Abstract (may include machine translation)

Contrary to standard search models predictions, past studies have not found a positive effect of unemployment insurance (UI) on reemployment wages. We estimate a positive UI wage effect exploiting an age-based regression discontinuity design in Austria. A search model incorporating duration dependence predicts two countervailing forces: UI induces workers to seek higher-wage jobs, but reduces wages by lengthening unemployment. Matching-function heterogeneity plausibly generates a negative relationship between the UI unemployment-duration and wage effects, which holds empirically in our sample and across studies, reconciling disparate wage-effect estimates. Empirically, UI raises wages by improving reemployment firm quality and attenuating wage drops.

Original languageEnglish
Pages (from-to)527-561
Number of pages35
JournalAmerican Economic Review
Volume107
Issue number2
DOIs
StatePublished - Feb 2017
Externally publishedYes

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