hazard models

Abstract

This paper uses two data sets to examine the impact of the potential
duration of unemployment insurance (UI) benefits on the duration of
unemployment and the time pattern of the escape rate from unemployment in the
United States. The first part of the empirical work uses a large sample of
household heads to examine differences in the unemployment spell distributions
of UI recipients and nonrecipients. Sharp increases in the rate of escape
from unemployment both through recalls and new job acceptances are apparent
for UI recipients around the time when benefits are likely to lapse. The
absence of such spikes in the escape rate from unemployment for nonrecipients
strongly suggests that the potential duration of UI benefits affects firm
recall policies and workers’ willingness to start new jobs. The second part
of our empirical work uses accurate administrative data to examine the effects
of the level and length of UI benefits on the escape rate from unemployment of
UI recipients. The results indicate that a one week increase in potential
benefit duration increases the average duration of the unemployment spells of
UI recipients by 0.16 to 0.20 weeks. The estimates also imply that policies
that extend the potential duration of benefits increase the mean duration of
unemployment by substantially more than policies with the same predicted
impact on the total U1 budget that raise the level of benefits while holding
potential duration constant.

Year of Publication
1988
Number
241
Date Published
11/1988
Publication Language
eng
Citation Key
Journal of Public Economics, Vol. 41, No.1, February, 1990.
Meyer, B., & Katz, L. (1988). The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01jw827b66w (Original work published 11/1988AD)
Working Papers
Author
Abstract

Reemployment bonus experiments offer large lump sum payments to
unemployment insurance (UI) recipients who find a job quickly. Such
experiments are underway or have been recently completed in four states. This
paper analyzes the results from Illinois and discusses the implications of the
experiments for theories of unemployment and policy design. I examine the
hazard rate of exit from unemployment and find that it is significantly higher
for the experimental groups, but only during the period of bonus eligibility.
Both labor supply and search theories of unemployment are shown to suggest a
rise in the reemployment hazard just before the end of bonus eligibility and
to suggest larger effects of the fixed amount bonus for lower income groups.
Only weak support is found for these hypotheses, which suggests limitations of
the models of unemployment. Some modifications of the models are suggested.
The experiments demonstrate the effects of economic incentives on job
finding behavior but they do not show the desirability of a permanent
reemployment bonus program. Evidence from another sample suggests that as
many as half of those who received a reemployment bonus returned to their
previous employer, so that a bonus program that pays people returning to their
last employer would provide a strong encouragement to temporary layoffs. A
discussion of UI claim filing behavior suggests that a permanent program could
well increase the frequency or promptness of filing, thus reducing any
financial advantages of a bonus program.

Year of Publication
1988
Number
242
Date Published
11/1988
Publication Language
eng
Citation Key
National Bureau of Economic Research No. 2783, December 1988.
Meyer, B. (1988). Implications of the Illinois Reemployment Bonus Experiments for Theories of Unemployment and Policy Design. Retrieved from http://arks.princeton.edu/ark:/88435/dsp011r66j113m (Original work published 11/1988AD)
Working Papers