The Effect of a Reemployment Bonus with the Possibility of Recall: Experimental Evidence from New Jersey


This paper analyzes the results of the New Jersey Unemployment
Insurance Reemployment Demonstration Project (NJUIRDP) and presents a
framework for understanding the effects of the reemployment bonus and Job
Search Assistance (JSA) aspects of the program. A simple search model
which allows the possibility of recall leads to predictions about the time
pattern of the effects of a bonus offer on new job finding. The
experimental nature of the NJUIRDP allows the effect of the bonus to be
isolated, and evidence is found for a positive effect early in the bonus
period. This is consistent with the model. Evidence is also found that
initial expectation of recall has a negative effect on the new job finding
rate, but that this effect disappears over time. This is interpreted as
reflecting the updating of recall expectations, as pointed to by the search
model. This important interaction between time and recall expectations
implies that if JSA can speed up the adjustment of those expectations, the
new job finding rate will be increased. Evidence suggesting just such an
effect is found when the JSA treatment is isolated.

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