“Do Unemployment Benefits Affect Workers' Job Search? Evidence from Establishment Closures in West Germany” (JOB MARKET PAPER). [PDF] Abstract. The
effect of unemployment benefits (UB) on the behavior of unemployed individuals
has been extensively studied in the literature. In contrast, we still know
little about how UB affect the behavior of employed workers. This paper aims at
filling this gap, using job-to-job (JTJ) transitions as the main outcome of
analysis. The theoretical framework developed in the paper indicates that UB
should only affect the behavior of workers who are at risk of job loss.
Therefore, I focus the analysis on workers at establishments that subsequently
closed down. The data comes from administrative records for West Germany. I
exploit changes in the rules for the duration of unemployment benefits in the
80’s and 90’s to test the prediction from the model that workers with longer
benefits would be less likely to take a new job before their establishments
close down. This can be explained because workers entitled to longer benefits
have incentives to exert less effort in searching for a new job and also have
higher reservation wages. I find that the empirical evidence strongly supports
this prediction. In other words, I find that workers entitled to longer
benefits are more likely to remain with the establishments until their closure. |