Labor force participation, job search effort and unemployment insurance in the laboratory

Wolfgang Lechthaler and Patrick Ring

No 2149, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: How the provision of unemployment benefits affects employment and unemployment is a debated issue. In this paper, we aim at complementing theoretical and empirical contributions to this debate with a laboratory experiment: We simulate a job market with search effort and labor force participation decisions while varying the maximum length of unemployment benefit eligibility. Our results reveal two separable, opposing effects: Individuals within the labor force search with lower effort when unemployment benefits are extended. However, individuals are more likely to participate in the labor force and to actively search for a job. Concerning employment, the second effect dominates so that unemployment benefits raise employment.

Keywords: Job Search; Employment; Labor Force Participation; Unemployment Insurance; Economic Recession; Laboratory; Experiment (search for similar items in EconPapers)
JEL-codes: E70 J21 J65 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ias and nep-lab
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Journal Article: Labor force participation, job search effort and unemployment insurance in the laboratory (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:2149

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