Discussion Paper Details

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Title: Does Extending Unemployment Benefits Improve Job Quality?

Author(s): Arash Nekoei and Andrea Weber

Publication Date: May 2015

Keyword(s): job search, regression discontinuity design, unemployment insurance and wages

Programme Area(s): Labour Economics

Abstract: Contrary to standard search model predictions, prior studies failed to estimate a positive effect of unemployment insurance (UI) on reemployment wages. This paper estimates a positive UI wage effect exploiting an age-based regression discontinuity in Austrian administrative data. A search model incorporating duration dependence determines the UI wage effect as the balance between two offsetting forces: UI causes agents to seek higher-wage jobs, but also reduces wages by lengthening unemployment. This implies a negative relationship between the UI unemployment duration and wage effects, which holds empirically both in our sample and across studies, reconciling disparate wage-effect estimates. Empirically, UI raises wages by improving reemployment firmsí quality and attenuating wage drops.

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Bibliographic Reference

Nekoei, A and Weber, A. 2015. 'Does Extending Unemployment Benefits Improve Job Quality?'. London, Centre for Economic Policy Research.