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

Nir Jaimovich, Domenico Ferraro, Francesca Molinari and Cristobal Young

No 14786, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Date: 2020-05
New Economics Papers: this item is included in nep-dge, nep-ias and nep-mac
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