Labor force participation, job search effort and unemployment insurance in the laboratory

Wolfgang Lechthaler and Patrick Ring

No 2149, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: How the provision of unemployment benefits affects employment and unemployment is a debated issue. In this paper, we aim at complementing theoretical and empirical contributions to this debate with a laboratory experiment: We simulate a job market with search effort and labor force participation decisions while varying the maximum length of unemployment benefit eligibility. Our results reveal two separable, opposing effects: Individuals within the labor force search with lower effort when unemployment benefits are extended. However, individuals are more likely to participate in the labor force and to actively search for a job. Concerning employment, the second effect dominates so that unemployment benefits raise employment.

Keywords: Job Search; Employment; Labor Force Participation; Unemployment Insurance; Economic Recession; Laboratory; Experiment (search for similar items in EconPapers)
JEL-codes: E70 J21 J65 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ias and nep-lab
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Journal Article: Labor force participation, job search effort and unemployment insurance in the laboratory (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:2149

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