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The Safety Net as a Springboard? A General Equilibrium Based Policy Evaluation


Ferraro, Domenico; Jaimovich, Nir; Molinari, Francesca; Young, Cristobal (2020). The Safety Net as a Springboard? A General Equilibrium Based Policy Evaluation. CEPR Discussion Papers 14786, Centre for Economic Policy Research.

Abstract

We develop a search-and-matching model where the magnitude of unemployment insurance benefits affects the likelihood that unemployed actually engage in active job search. To quan- titively discipline this relation we use administrative data of unemployed search audits. We use the model to quantify the effects of unemployment reforms. For small benefits' increases, the policymaker faces a trade-off between an uptick in the measure of unemployed actually searching and a fall in the unemployment exit-rate conditional on searching. For larger bene- fits' increases, an active search margin magnifies the benefits' disincentives, leading to a bigger drop in the employment rate than previously thought.

Abstract

We develop a search-and-matching model where the magnitude of unemployment insurance benefits affects the likelihood that unemployed actually engage in active job search. To quan- titively discipline this relation we use administrative data of unemployed search audits. We use the model to quantify the effects of unemployment reforms. For small benefits' increases, the policymaker faces a trade-off between an uptick in the measure of unemployed actually searching and a fall in the unemployment exit-rate conditional on searching. For larger bene- fits' increases, an active search margin magnifies the benefits' disincentives, leading to a bigger drop in the employment rate than previously thought.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:E24, J64, J65
Uncontrolled Keywords:unemployment insurance, search behavior, costly search, liquidity effect.
Language:English
Date:August 2020
Deposited On:07 Oct 2020 15:39
Last Modified:07 Oct 2020 15:39
Series Name:CEPR Discussion Papers
Number of Pages:69
ISSN:0265-8003
OA Status:Green
Free access at:Official URL. An embargo period may apply.
Official URL:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3612855

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