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Unemployment Insurance Take-up Rates in an Equilibrium Search Model

Auray Stéphane (), Fuller David () and Lkhagvasuren Damba ()
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Auray Stéphane: CREST-ENSAI ; ULCO
Fuller David: University of Wisconsin-Oshkosh
Lkhagvasuren Damba: Concordia University

No 2017-58, Working Papers from Center for Research in Economics and Statistics

Abstract: From 1989-2012, on average 23% of those eligible for unemployment insurance (UI) bene?ts in the US did not collect them. In a search model with matching frictions, asymmetric information associated with the UI non-collectors implies an inefficiency in non-collector outcomes. This inefficiency is characterized along with the key features of collector vs. non-collector allocations. Specifically, the inefficiency implies that noncollectors transition to employment at a faster rate and a lower wage than the efficient levels. Quantitatively, the inefficiency amounts to 1.71% welfare loss in consumption equivalent terms for the average worker, with a 3.85% loss conditional on non-collection. With an endogenous take-up rate, the unemployment rate and average duration of unemployment respond significantly slower to changes in the UI bene?t level, relative to the standard model with a 100% take-up rate.

Keywords: unemployment insurance; take-up; matching frictions; search; experience rating (search for similar items in EconPapers)
JEL-codes: E61 J32 J64 J65 (search for similar items in EconPapers)
Date: 2017-07-12
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