Unemployment Insurance and Underemployment

Should unemployment insurance (UI) systems provide coverage for underemployed job seekers? Based on a statistical analysis of Norwegian unemployment spells, we conclude that the answer to this question is yes. Allowing insured job seekers to retain partial UI benefits during periods of insufficient part‐time work not only reduces UI expenditures during the part‐time work period, but it also unambiguously reduces the time until a regular self‐supporting job is found. Probable explanations are that even small temporary part‐time jobs provide access to useful vacancy information and that such jobs are used by employers as a screening device when hiring from the unemployment pool.     

失业保险给付期限差异下的失业持续时间研究

本文对享受不同失业保险给付期限的失业者的失业持续时间差异进行了实证研究。根据工作搜寻理论,应用存活分析方法建立了含有失业保险给付期限因素的失业持续时间模型,并对青岛市失业者登记数据进行了实证研究。结果表明:享受失业保险者的失业持续时间明显长于不享受失业保险者的失业持续时间,在失业保险给付额度相同的条件下,失业保险给付期限与失业持续时间成同向变动关系。     

Effects of Changes in the Unemployment Insurance Eligibility Requirements on Job Duration — Swedish Evidence

This paper investigates the impact of the unemployment insurance (UI) entrance requirement on employment duration among earlier unemployed in Sweden. I exploit changes in the rules taking place in 1994 and 1997 to study behavioural adjustments in the timing of job separation in 1992, 1996, and 1998, respectively. Performing across‐year analyses with years involving different working requirements, I find some evidence of clustering of job exits at the time of UI qualification. By using predicted hazard rates for each week, I calculate an approximate 2.3‐week extension in average employment duration between 1996 and 1998, due to the 5‐week prolonging of the entrance requirement.     

Unemployment Insurance and Entrepreneurship

Based on administrative registers from Norway, we examine how unemployment insurance (UI) and active labor market programs (ALMP) affect the transition rates from unemployment to regular employment and entrepreneurship, as well as subsequent earnings levels. We find that both the employment and entrepreneurship hazards rise sharply in response to UI sanctions and UI exhaustion. On average, transitions to entrepreneurship are more profitable than transitions to regular employment. While employment transitions are highly pro‐cyclical, entrepreneurship transitions are weakly counter‐cyclical. ALMPs targeted at entrepreneurship are rare in Norway, but the few start‐up subsidies that are provided are successful in terms of generating paid work.     

Uncertainty and Unemployment

This paper studies the impact of time‐varying idiosyncratic risk at the establishment level on unemployment fluctuations over 1972–2009. I build a tractable directed search model with firm dynamics and time‐varying idiosyncratic volatility. The model allows for endogenous separations, entry and exit, and job‐to‐job transitions. I show that the model can replicate salient features of the microeconomic behavior of firms and that the introduction of volatility improves the fit of the model for standard business cycle moments. In a series of counterfactual experiments, I show that time‐varying risk is important to account for the magnitude of fluctuations in aggregate unemployment for past U.S. recessions. Though the model can account for about 40% of the total increase in unemployment for the 2007–2009 recession, uncertainty alone is not sufficient to explain the magnitude and persistence of unemployment during that episode.     

Foreign Languages and their Impact on Unemployment

Using a large European data set, I investigate the impact of knowing foreign languages on unemployment for the first time. The focus is on natives (not on immigrants). I find that (1) knowing a foreign language reduces the probability of being unemployed by at least 3.4 percentage points; (2) females benefit more than males from learning foreign languages; (3) English and German tend to have a larger and more robust impact on unemployment than French, Spanish, and Italian; (4) but the impact of all these five languages varies considerably across countries.     

Self‐financing Unemployment Insurance and Bargaining Structure

Abstract. This study examines how the size of trade unions relative to the labor force impacts on the desirability of different organizational forms of self‐financing unemployment insurance (UI). For this purpose, we compare the outcome of a model with a uniform payroll tax to a model where workers pay taxes according to their systematic risk of unemployment. Our results highlight the importance of the bargaining structure for the assessment of a particular UI scheme. Most importantly, it depends on the relative size of the unions whether efficiency favors a uniform or a differentiated UI scheme.     

Two Questions about European Unemployment

A general equilibrium search model makes layoff costs affect the aggregate unemployment rate in ways that depend on equilibrium proportions of frictional and structural unemployment that in turn depend on the generosity of government unemployment benefits and skill losses among newly displaced workers. The model explains how, before the 1970s, lower flows into unemployment gave Europe lower unemployment rates than the United States and also how, after 1980, higher durations have kept unemployment rates in Europe persistently higher than in the United States. These outcomes arise from the way Europe's higher firing costs and more generous unemployment compensation make its unemployment rate respond to bigger skill losses among newly displaced workers. Those bigger skill losses also explain why U.S. workers have experienced more earnings volatility since 1980 and why, especially among older workers, hazard rates of gaining employment in Europe now fall sharply with increases in the duration of unemployment.     

UNEMPLOYMENT INSURANCE AND CULTURAL TRANSMISSION: THEORY AND APPLICATION TO EUROPEAN UNEMPLOYMENT

This paper emphasizes the two‐way causality between the provision of unemployment insurance and the cultural transmission of civicness. The returns to being uncivic are increasing in the generosity of unemployment insurance; but this generosity is decreasing in the number of uncivic individuals. In this context, I determine the evolution of preferences across generations and show that cultural heterogeneity is sustained over the long‐run. The dynamics of cultural transmission can generate a long lag between the introduction of unemployment insurance and an increase in people's willingness to live off government‐provided benefits. Hence, it offers an explanation to the ‘European unemployment puzzle’ due to the coexistence of generous unemployment insurance and low unemployment in the 1950s and 1960s.     

Unemployment Propensity and Unemployment Duration

ABSTRACT: This paper analyses the factors affecting the duration of an unemployment spell. The results indicate the absence of statistically significant ‘‘duration dependence‘‘ effects for men. Person-specific unemployment propensity is found to have a significant effect on re-employment probabilities. The latter implies an unequal distribution of unemployment burden among the population.     

Unemployment Duration in an Unemployment Blackspot

This paper analyses the factors affecting the duration of an unemployment spell amongst a sample of exclusively long-term unemployed individuals. The results indicate that person-specific unemployment propensities have a significant effect on re-employment probabilities. These effects, however, vary significantly by gender and religion. The results also indicate statistically significant negative ‘duration dependence’ effects. The evidence suggests that employers regard long unemployment durations as a ‘negative signal’ about an applicant's potential productivity. The latter implies that, in terms of government policies aimed at reducing unemployment, the demand-side of the unemployment equation should be given greater emphasis.     

Unemployment in Urban China: an Analysis of Survey Data from Shanghai

Abstract. We analyse the unemployment problem in the largest Chinese city, Shanghai, based on a survey of the unemployed conducted in late 1989. We find, as expected, that unemployment is particularly serious among school-leavers and contract and temporary workers, but also find a surprisingly high incidence of unemployment amongst permanent state employees and relatively long unemployment durations. The Shanghai unemployed rely heavily on occasional work for support, and only a small proportion-receive state benefit. We identify problems of interpretation stemming from the stock-sampling nature of the survey, and use non-parametric methods to reveal an underlying strong downward movement in individual re-employment probabilities.     

Shocks,Stocks, and Socks: Smoothing Consumption Over a Temporary Income Loss

We investigate how households in temporarily straitened circumstances due to an unemployment spell cut back on expenditures and how they spend marginal dollars of unemployment insurance (UI) benefit. Our theoretical and empirical analyses emphasize the importance of allowing for the fact that households buy durable as well as non‐durable goods. The theoretical analysis shows that in the short run households can cut back significantly on total expenditures without a significant fall in welfare if they concentrate their budget reductions on durables. We then present an empirical analysis based on a Canadian survey of workers who experienced a job separation. Exploiting changes in the unemployment insurance system over our sample period we show that cuts in UI benefits lead to reductions in total expenditure with a stronger impact on clothing than on food expenditures. Our empirical strategy allows that these expenditures may be non‐separable from employment status. The effects we find are particularly strong for households with no liquid assets before the spell started. These qualitative findings are in precise agreement with the theoretical predictions. (JEL: D11, D12, D91, J65)     

Unemployment and Earnings Assimilation of Immigrants

The regional unemployment elasticity of annual earnings for non‐OECD immigrants is found to be more than three times larger than for natives, using micro data covering all immigrants in Norway in 1990 and a random sample of natives. The decline in relative earnings of non‐OECD immigrants from 1980 to 1990 can largely be explained by the stronger impact of rising unemployment on immigrant earnings. These results highlight the importance of controlling for different period effects caused by fluctuating unemployment in panel studies of earnings assimilation among immigrants.     

Heterogeneity and Unemployment Duration

ABSTRACT: Various unemployment duration models are estimated on a large Norwegian dataset covering labour market history 1.1.1989-31.12.1992 for all persons who became unemployed during October 1990. As many unemployed leave the unemployment register without going directly to a job, two alternative definitions of unemployment are used — register unemployment and joblessness. The problem of heterogeneity is addressed both by partitioning the individuals into four categories by previous unemployment history, and by including a random term in the job hazard. Observed as well as unobserved heterogeneity affects the estimates of expected duration to a great extent. When gamma-distributed unobserved heterogeneity is accounted for, the estimates of duration dependence become more positive relative to models where unobserved heterogeneity is ignored. Among persons who are entitled to unemployment benefit, the duration dependence appears to be significantly positive. Alternative specifications of the baseline hazard hardly affect estimates of the effects of the covariates on duration.     

The Influence of Unemployment Benefits on Unemployment Duration: Evidence from Spain

ABSTRACT: This paper analyses the duration of unemployment spells and the possible incidence of unemployment insurance on job search behaviour and voluntary duration of unemployment in Spain. To do so, a longitudinal data set containing information on unemployment recipients during the period 1987-93 is used. Hazard rates and survival profiles are constructed for the cohorts of unemployed workers entering the benefit system at different points in time, and a logit model of the probability of leaving the system before exhausting entitlement period is presented. The results do not support the view that the unemployed tend to intensify their job search when benefits are near exhaustion.     

A Qualitative Analysis of Unemployment in Spain

Abstract. This paper analyzes the demographic characteristics of unemployment in Spain using individual household data. Binary-logit models are estimated for three microdata sets at different periods of time, in order to detect possible compositional changes in unemployment over time. The results indicate that characteristics such as age, education level and marital status are relevant to explain differences in unemployment. The fact that the male and female models turn out to be very similar may be due to hidden female unemployment. The estimated models are used to predict unemployment probabilities as a function of individual characteristics.     

On the Time Sequence of Unemployment Benefits When Search is Costly

Should we cut the level of unemployment benefits, or reduce their potential duration? The answer depends on the way the unemployed search behaviour and unemployment insurance schemes interact. In this paper, we consider that unemployment insurance funds can be used to improve search. Resulting hazards are increasing over the unemployment spell prior to the exhaustion of benefits, and plummet immediately after it. Turning to policy implications, we assume the public decision–maker aims to minimize the average duration of unemployment under a resource constraint. First, we show the stationary relationship between average unemployment duration and unemployment benefit is hump–shaped. Second, raising benefits over a short duration can reduce average duration. Finally, we demonstrate that most of the time, a declining (yet always positive) benefit scheme is optimal.     

Microfoundations of Unemployment Theory

Abstract. Both the efficiency wage theory and the insider-outsider theory are promising attempts to explain the existence of unemployment. These theories also explain why workers are often laid-off or fired, rather than retained at lower wages than the initial ones when there is a reduction in the demand for labour. The type of unemployment that is explained in these theories may also be called “involuntary” in a well-defined way; the distinction between voluntary and involuntary unemployment is then made on the basis of the constraints that apply for economic agents. This paper tries to pin down such constraints, and to investigate whether various theories of unemployment are able to answer the fundamental questions that a good theory of unemployment should be able to answer.     

Macroeconomic Determinants of Equilibrium Unemployment Insurance

This paper proposes a new modeling strategy as regards the definition of an optimal level of unemployment benefits. While the traditional methodology privileges labor market equilibrium to derive optimal employment, wage and unemployment benefit levels, we present a model in which the optimal level of unemployment benefits is a function of the government’s macroeconomic objectives in terms of inflation and output fluctuations. In a second stage, the model allows for the investigation of unemployment insurance effects on labor market equilibrium.