Unemployment Benefits and Labour Market Transitions in Britain

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Recent evidence suggests that unemployment benefit recipients search more extensively than non-recipients. It is conceivable that benefit claimants, looking for work in a more formal search environment, enjoy an informational advantage relative to non-claimants. This paper examines how such an effect could influence the probability of leaving unemployment, utilising data drawn from a matched sub-sample of the 1983 and 1984 Labour Force Surveys. Studies which neglect the claimant/non-claimant dichotomy may bias the true impact of the benefit system on transitions, since they also neglect this informational asymmetry. Utilising a general Markovian framework, multinomial logistic regressions of individual annual transition probabilities from unemployment into employment and inactivity are estimated. Benefit receipt has a small positive influence on the likelihood of employment entry amongst those most at risk from labour force exit- women and the long-term unemployed. The main benefit impact however, is to maintain a higher effective labour supply.

Date: 1992-04
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0073

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