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Title: The Safety Net as a Springboard? A General Equilibrium based Policy Evaluation

Author(s): Domenico Ferraro, Nir Jaimovich, Francesca Molinari and Cristobal Young

Publication Date: May 2020

Keyword(s):

Programme Area(s): Labour Economics and Monetary Economics and Fluctuations

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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Bibliographic Reference

Ferraro, D, Jaimovich, N, Molinari, F and Young, C. 2020. 'The Safety Net as a Springboard? A General Equilibrium based Policy Evaluation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14786