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Do Low‐Wage Workers React Less to Longer Unemployment Benefits? Quasi‐Experimental Evidence *
Author(s) -
Centeno Mário,
Novo Álvaro A.
Publication year - 2014
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12019
Subject(s) - unemployment , entitlement (fair division) , economics , labour economics , wage , consumption (sociology) , distribution (mathematics) , empirical evidence , duration (music) , low wage , demographic economics , microeconomics , macroeconomics , art , philosophy , epistemology , mathematical analysis , social science , mathematics , literature , sociology
The fact that unemployed workers have different abilities to smooth consumption entails heterogeneous responses to extended unemployment benefits. Our empirical exercise explores a quasi‐experimental setting generated by an increase in the benefits entitlement period. The results suggest a hump‐shape response of unemployment duration over the one‐year pre‐unemployment wage distribution; individuals at the bottom and top of the wage distribution reacted less than those in the interquartile range. This behaviour of job searchers is consistent with labour supply models with unemployment insurance and savings. It questions the optimality of very long entitlement periods to target the unemployment experiences of low‐wage workers.