Unemployment Benefit Levels and Search Activity

John Schmitt and Jonathan Wadsworth

Oxford Bulletin of Economics and Statistics, 1993, vol. 55, issue 1, 1-24

Abstract: This paper endogenises the job offer arrival rate in a standard search model in order to test the hypothesis that unemployment-related benefits may affect the job search behavior of unemployed workers independently of any reservation wage effect. Using a pooled cross-section of 1484 unemployed British men from the 1979 to 1982 General Household Surveys, we find that the level of benefit has no significant effect on unemployed search behavior. Any disincentive effect of an increase in benefits on the return to job search is offset by a positive stimulus to search from increased income. Factors which do have an important impact on search activity include: age, unemployment duration, occupation, and education level. Further, local labor market conditions affect only the job search behavior of the short-term unemployed. Copyright 1993 by Blackwell Publishing Ltd

Date: 1993
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