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 language | English |
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Pages (from-to) | 527-561 |
Number of pages | 35 |
Journal | American Economic Review |
Volume | 107 |
Issue number | 2 |
DOIs | |
State | Published - Feb 2017 |
Externally published | Yes |