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The Effect of Unemployment Benefits and Nonemployment Durations on Wages
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Journal Article
The Effect of Unemployment Benefits and Nonemployment Durations on Wages
2016
Overview
We estimate that unemployment insurance (UI) extensions reduce reemployment wages using sharp age discontinuities in UI eligibility in Germany. We show this effect combines two key policy parameters: the effect ofUI on reservation wages and the effect of nonemployment durations on wage offers. Our framework implies if UI extensions do not affect wages conditional on duration, then reservation wages do not bind. We derive resulting instrumental variable estimates for the effect of nonemployment durations on wage offers and bounds for reservation wage effects. The effect of UI on wages we find arises mainly from substantial negative nonemployment duration effects.
Publisher
American Economic Association,American Economic Assoc
Subject
