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Unemployment Insurance and Subsequent Job Duration: Job Matching vs Unobserved Heterogeneity

Christian Belzil ()

CIRANO Working Papers from CIRANO

Abstract: The relationship between Unemployment Insurance (UI) benefit duration, unemployment duration and subsequent job duration is investigated using a multi-state duration model with state specific unobserved heterogeneity. I examine two potential explanations for the negative correlation between unemployment and job spell durations; UI benefits increase job matching quality (the Matching effect) vs unobserved heterogeneity (Adverse Selection). The Matching effect is found to be weak. Although new jobs accepted within 5 weeks of benefit termination seem to have a higher dissolution rate, the negative correlation between unemployment and job duration is mostly explained by unobserved heterogeneity. Various simulations indicate that increasing the maximum benefit duration by one week will raise expected unemployment duration by 1.0 to 1.5 days but will raise expected job duration by 0.5 to 0.8 days only. Dans cet article, j'analyse le lien entre la durée des prestations d'assurance-chômage, la durée du chômage et la durée de l'emploi subséquent. L'analyse est faite à l'aide d'un modèle de durée avec états multiples et hétérogénéité non-observée. ¸ l'aide du modèle, je tente de faire la distinction entre deux hypothèses possibles qui expliqueraient la corrélation négative entre durée de chômage et durée de l'emploi subséquent; la durée des prestations augmente la durée de l'emploi subséquent (un effet de matching), ou la corrélation négative est expliquée par la sélection adverse. Les résultats tendent à supporter l'hypothèse de sélection adverse tandis que l'effet de matching semble être faible.

Keywords: Unemployment insurance; job matching; unemployment duration; job duration; Assurance-chômage; matching de l'emploi; durée du chômage; durée de l'emploi (search for similar items in EconPapers)
Date: 2001-03-01
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https://cirano.qc.ca/files/publications/2001s-21.pdf

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Handle: RePEc:cir:cirwor:2001s-21