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Unemployment Insurance and Job Search in the Great Recession
TL;DR: The authors used the longitudinal structure of the Current Population Survey to construct unemployment exit hazards that vary across states, over time, and between individuals with differing unemployment durations, and then used these hazards to explore a variety of comparisons intended to distinguish the effects of UI extensions from other determinants of employment outcomes.
Abstract: Nearly two years after the official end of the "Great Recession," the labor market remains historically weak. One candidate explanation is supply-side effects driven by dramatic expansions of Unemployment Insurance (UI) benefit durations, to as many as 99 weeks. This paper investigates the effect of these UI extensions on job search and reemployment. I use the longitudinal structure of the Current Population Survey to construct unemployment exit hazards that vary across states, over time, and between individuals with differing unemployment durations. I then use these hazards to explore a variety of comparisons intended to distinguish the effects of UI extensions from other determinants of employment outcomes.The various specifications yield quite similar results. UI extensions had significant but small negative effects on the probability that the eligible unemployed would exit unemployment, concentrated among the long-term unemployed. The estimates imply that UI benefit extensions raised the unemployment rate in early 2011 by only about 0.1-0.5 percentage points, much less than is implied by previous analyses, with at least half of this effect attributable to reduced labor force exit among the unemployed rather than to the changes in reemployment rates that are of greater policy concern.
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TL;DR: In this paper, the role of employer behavior in generating negative duration dependence was studied by sending fictitious resumes to real job postings in 100 U.S. cities, showing that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker's unemployment spell, with the majority of this decline occurring during the first eight months.
Abstract: This article studies the role of employer behavior in generating ''negative duration dependence''—the adverse effect of a longer unemployment spell—by sending fictitious resumes to real job postings in 100 U.S. cities. Our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker's unemployment spell, with the majority of this decline occurring during the first eight months. We explore how this effect varies with local labor market conditions and find that duration de- pendence is stronger when the local labor market is tighter. This result is consistent with the prediction of a broad class of screening models in which employers use the unemployment spell length as a signal of unobserved productivity and recognize that this signal is less informative in weak labor markets. JEL Code: J64.
490 citations
Cites methods from "Unemployment Insurance and Job Sear..."
...We match observations across months, and we measure job finding as an individual exiting from unemployment and reporting being employed in each of the subsequent two months (i.e., a U-E-E spell following Rothstein (2011))....
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Posted Content•
TL;DR: This paper developed a simple spatial equilibrium model designed to characterize the welfare effects of place-based policies on the local and the national economy, using this model, critically evaluate the economic rationales for place based policies and assess the latest evidence on their effects.
Abstract: Most countries exhibit large and persistent geographical differences in wages, income and unemployment rates. A growing class of ``place based'' policies attempt to address these differences through public investments and subsidies that target disadvantaged neighborhoods, cities or regions. Place based policies have the potential to profoundly affect the location of economic activity, along with the wages, employment, and industry mix of communities. These programs are widespread in the U.S. and throughout the world, but have only recently been studied closely by economists. We consider the following questions: Who benefits from place based interventions? Do the national benefits outweigh the costs? What sorts of interventions are most likely to be effective? To study these questions, we develop a simple spatial equilibrium model designed to characterize the welfare effects of place based policies on the local and the national economy. Using this model, we critically evaluate the economic rationales for place based policies and assess the latest evidence on their effects. We conclude with some lessons for policy and directions for future research.
271 citations
Posted Content•
TL;DR: In this paper, the authors investigated the effect of extending the duration of unemployment insurance (UI) in recessions and found that the non-employment effects of a month of additional UI benefits are, at best, somewhat declining in the recessions, and the additional coverage provided by UI extensions, rises substantially during a downturn.
Abstract: One goal of extending the duration of unemployment insurance (UI) in recessions is to increase UI coverage in the face of longer unemployment spells Although it is a common concern that such extensions may themselves raise nonemployment durations, it is not known how recessions would affect the magnitude of this moral hazard To obtain causal estimates of the differential effects of UI in booms and recessions, this paper exploits the fact that, in Germany, potential UI benefit duration is a function of exact age which is itself invariant over the business cycle We implement a regression discontinuity design separately for twenty years and correlate our estimates with measures of the business cycle We find that the nonemployment effects of a month of additional UI benefits are, at best, somewhat declining in recessions Yet, the UI exhaustion rate, and therefore the additional coverage provided by UI extensions, rises substantially during a downturn The ratio of these two effects represents the nonemployment response of workers weighted by the probability of being affected by UI extensions Hence, our results imply that the effective moral hazard effect of UI extensions is significantly lower in recessions than in booms Using a model of job search with liquidity constraints, we also find that, in the absence of market-wide effects, the net social benefits from UI extensions can be expressed either directly in terms of the exhaustion rate and the nonemployment effect of UI durations, or as a declining function of our measure of effective moral hazard
246 citations
TL;DR: The authors showed that the participation margin accounts for around one-third of unemployment fluctuations, and that the role of the margin appears robust to adjustments for spurious transitions induced by reporting error. And they showed that increases in labor force attachment among the unemployed during recessions are a leading explanation for the role in participation margin.
234 citations
Cites background or methods from "Unemployment Insurance and Job Sear..."
...[TABLE 2 ABOUT HERE] Approaches of this kind recently have been used as a common robustness check in studies of worker flows (see Rothstein 2011, and Farber and Valletta 2013)....
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...Second, and relatedly, Rothstein (2011) notes that eliminating such transition reversals closes the gap between unemployment survival functions estimated from longitudinally-linked and crosssectional CPS data.5 To identify, and therefore purge, these transition reversals, it is necessary to match…...
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...However, estimates of the impact of such UI extensions suggest a modest impact on unemployment (see Aaronson, Mazumder, and Schecter, 2010; Farber and Valletta, 2013; Fujita, 2010; Nakajima, 2012; Rothstein, 2011; Valletta and Kuang, 2010; and Valletta, 2010)....
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Journal Article•
TL;DR: The data on employment, unemployment and the labour force are not necessarily the same as the series used for analyses and forecasting by the OECD Economics Department and reproduced in Tables 0.2 and 0.3 of the “Recent Developments” section at the beginning of this publication as discussed by the authors.
Abstract: Sources and definitions Most of the statistics shown in these tables can also be found in two other (paper or electronic) publication and data repository, as follows: ● the annual edition of OECD Labour Force Statistics, 1987-2007; ● OECD.Stat, the OECD’s central data warehouse (www.oecd.org/els/employment/data), which contains both raw data and derived statistics. These references, which include information on definitions, notes and sources used by OECD countries, contain longer time series and more detailed data by age group, gender, duration of unemployment, etc., than are shown in this annex. Please note that the data on employment, unemployment and the labour force are not necessarily the same as the series used for analyses and forecasting by the OECD Economics Department and reproduced in Tables 0.2 and 0.3 of the “Recent Developments” section at the beginning of this publication. Interested users can refer to the on-line database (www.oecd.org/els/employment/data), which contains data series on the labour market situation in OECD countries: population, labour force, employment and unemployment disaggregated by gender and age, educational attainment, employment status and sector of activity, participation and unemployment rates, statistics on part-time employment and duration of unemployment, job tenure, etc. The on-line database contains a number of additional series on labour market performances and on features of the institutional and regulatory environment affecting the functioning of labour markets. Among these are the following: ● annual hours of work data for comparisons of trends over time; ● distribution of gross earnings of full-time workers by earnings decile and by sex to derive various measures of earnings dispersion; ● gross mean and median earnings of full-time workers by age group and gender; ● statutory minimum wages; ● public expenditure on labour market programmes and number of participants; ● trade union density rates in OECD countries.
229 citations
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Posted Content•
TL;DR: The most complete plant-level data source currently available, the Longitudinal Research Data constructed by the Census Bureau, is used in this article to study the U.S. manufacturing sector from 1972 to 1988 and develop a statistical portrait of the microeconomic adjustments to the many economic events that affect businesses and workers.
Abstract: Job Creation and Destruction is the culmination of a long, ongoing research program at the Center for Economic Studies. Using the most complete plant- level data source currently available--the Longitudinal Research Data constructed by the Census Bureau--it focuses on the U.S. manufacturing sector from 1972 to 1988 and develops a statistical portrait of the microeconomic adjustments to the many economic events that affect businesses and workers. The picture that emerges is one of large, persistent, and highly concentrated gross job flows, with job destruction dominating the cyclical feaures of net job flows. The authors describe in detail those characteristics that destroy and create jobs over time (including industry of origin, wage payments, international trade exposure, factor intensity, size, age, and productivity performance), while also providing a broader measure of the process that will be directly relevant to macroeconomists and policymakers.
2,024 citations
TL;DR: This paper studied the labor market experiences of white male college graduates as a function of economic conditions at time of college graduation and found that cohorts who graduate in worse economies are in lower level occupations and have slightly higher educational attainment.
Abstract: This paper studies the labor market experiences of white male college graduates as a function of economic conditions at time of college graduation. I use the National Longitudinal Survey of Youth whose respondents graduated college between 1979 and 1988 and are followed for 14 to 23 years after college graduation. I employ both national and state variation in economic conditions at time of college graduation to identify the effect. Because timing and location of college graduation could potentially be affected by economic conditions, I also instrument for the national unemployment rate usinf year of birth and for the state unemployment rate using year of birth and state of residence at age 14. I find large, negative wage effects to graduating in a worse economy which persist for the entire period studied. I find that cohorts who graduate in worse economies are in lower level occupations and have slightly higher educational attainment. Labor supply is unaffected.
829 citations
TL;DR: The authors analyzes the magnitude and sources of long-term earnings declines associated with graduation from college during a recession, using a large longitudinal university-employer-employee dataset, and finds that the cost of recessions for new graduates is substantial and unequal.
Abstract: This paper analyzes the magnitude and sources of long-term earnings declines associated with graduating from college during a recession. Using a large longitudinal university-employer-employee dataset, we find that the cost of recessions for new graduates is substantial and unequal. Unlucky graduates suffer persistent earnings declines lasting ten years. They start to work for lower paying employers, and then partly recover through a gradual process of mobility toward better firms. We document that more advantaged graduates suffer less from graduating in recessions because they switch to better firms quickly, while earnings of less advantaged graduates can be permanently affected by cyclical downgrading. (JEL E32, I23, J22, J23, J31)
764 citations