Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/110757 
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers No. 9034
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
Contrary to standard search model predictions, prior studies failed to estimate a positive effect of unemployment insurance (UI) on reemployment wages. This paper estimates a positive UI wage effect exploiting an age-based regression discontinuity in Austrian administrative data. A search model incorporating duration dependence determines the UI wage effect as the balance between two offsetting forces: UI causes agents to seek higher-wage jobs, but also reduces wages by lengthening unemployment. This implies a negative relationship between the UI unemployment duration and wage effects, which holds empirically both in our sample and across studies, reconciling disparate wage-effect estimates. Empirically, UI raises wages by improving reemployment firms' quality and attenuating wage drops.
Subjects: 
unemployment insurance
job-search
wages
JEL: 
H5
J3
J6
Document Type: 
Working Paper

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