Unemployment Insurance and Job Quits

Audrey Light () and Yoshiaki Omori

Journal of Labor Economics, 2004, vol. 22, issue 1, 159-188

Abstract: We investigate an unexplored avenue through which unemployment insurance increases unemployment. As unemployment insurance benefits rise, workers lose incentive to "preempt" impending layoffs by changing jobs. We formalize this prediction in a job search model and investigate it empirically by estimating a proportional hazard model with data from the 1979 National Longitudinal Survey of Youth, using state- and year-specific algorithms to compute each worker's expected unemployment insurance benefits. Our estimates reveal that an exogenous increase in benefits deters job quits by a small but statistically significant amount.

Date: 2004
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