Unemployment Insurance and Subsequent Job Duration: Job Matching vs Unobserved Heterogeneity

No 116, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The relationship between unemployment benefit duration, unemployment duration and subsequent job duration is investigated using a multi-state duration model with state specific unobserved heterogeneity. I allow maximum benefit duration to be correlated with unemployment duration as well as accepted job duration. I examine two potential explanations for the relationship between unemployment and job spell durations; UI benefits increase job matching quality vs unobserved heterogeneity. I find that the escape rate out of unemployment seems to raise significantly within 5 weeks of benefit termination and new jobs accepted within this 5 week period seem to have a higher dissolution rate. At the same time, unobserved heterogeneity is also found to explain the correlation between unemployment and job duration. Various simulations indicate that increasing the maximum benefit duration by one week will raise expected unemployment duration by 1 to 1.5 days and expected job duration by 0.5 to 0.9 day.

Keywords: job matching; Unemployment insurance; unemployment duration; job duration (search for similar items in EconPapers)
JEL-codes: J64 J65 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2000-02
New Economics Papers: this item is included in nep-ias, nep-lab, nep-ltv and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - published in: Journal of Applied Econometrics, 2001,16 (5), 619-636

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Working Paper: Unemployment Insurance and Subsequent Job Duration: Job Matching vs Unobserved Heterogeneity (2001)
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