The Behavior of Unemployment Insurance Recipients under Adverse Market Conditions

William N. Cooke

ILR Review, 1981, vol. 34, issue 3, 386-395

Abstract: This study examines the effect on job search behavior of changes in unemployment insurance (UI) provisions and in labor market conditions. There are good reasons for assuming, on the one hand, that more generous benefits prolong job search and, on the other hand, that an increase in the rate of unemployment causes recipients to reduce reservation wages and thus shorten their job search. Previous studies have not resolved which of these tendencies will prevail in case of a conflict. The evidence from two samples of recipients in Maine during the period 1974 – 76, when a significant increase occurred in both the rate of unemployment and the maximum weeks of potential receipt of UI, indicates that the effect of increased unemployment offsets the effect of increased benefits. The author concludes that extended benefit programs during periods of high unemployment do not cause recipients to ignore the realities of the market.

Date: 1981
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ilrrev:v:34:y:1981:i:3:p:386-395

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