Unemployment insurance take-up rates in an equilibrium search model

Stéphane Auray, David Fuller and Damba Lkhagvasuren

European Economic Review, 2019, vol. 112, issue C, 1-31

Abstract: From 1989 to 2012, on average, 23% of those eligible for unemployment insurance (UI) benefits in the US did not collect them. To understand the implications of these “unclaimed” benefits, we develop a directed search model with an endogenous UI take-up rate. In equilibrium, UI collectors have longer unemployment durations relative to non-collectors. The difference results from two forces, a consumption effect and a private information effect, as UI collection histories are unobservable. We characterize both effects analytically and quantitatively. With an endogenous take-up rate, the unemployment rate and average duration of unemployment respond significantly slower to changes in the UI benefit level, relative to the standard model with a 100% take-up rate. The private information effect on non-collector job finding rates plays an important role in this result.

Keywords: Unemployment insurance; Take-up; Calibration; Matching frictions; Search (search for similar items in EconPapers)
JEL-codes: E61 J32 J64 J65 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Related works:
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2018)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2018)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2017)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2013)
Working Paper: Unemployment Insurance Take-up Rate"s in an Equilibrium Search Model (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:112:y:2019:i:c:p:1-31

DOI: 10.1016/j.euroecorev.2018.11.005

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