The long-term effects of job search requirements: Evidence from the UK JSA reform

Barbara Petrongolo

No 7067, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper investigates long-term returns from unemployment compensation, exploiting variation from the UK JSA reform of 1996, which implied a major increase in job search requirements for eligibility and in the related administrative hurdle. Search theory predicts that such changes should raise the proportion of non-claimant nonemployed, with consequences on search effort and labor market attachment, and lower the reservation wage of the unemployed, with negative effects on post-unemployment wages. I test these ideas on longitudinal data from Social Security records (LLMDB). Using a difference in differences approach, I find that individuals who start an unemployment spell soon after JSA introduction, as opposed to six months earlier, are 2.5-3% more likely to move from unemployment into Incapacity Benefits spells, and 4-5% less likely to have positive earnings in the following year. This latter employment effect only vanishes four years after the initial unemployment shock. Also, annual earnings for the treated individuals are lower than for the non treated. These results suggest that while tighter search requirements were successful in moving individuals off unemployment benefits, they were not successful in moving them onto long-lasting or better jobs, with fairly long lasting unintended consequences on a number of labor market outcomes.

Keywords: Job search; Postunemployment earnings; Unemployment compensation (search for similar items in EconPapers)
JEL-codes: J31 J64 J65 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The long-term effects of job search requirements: Evidence from the UK JSA reform (2009)
Working Paper: The Long-Term Effects of Job Search Requirements: Evidence from the UK JSA Reform (2008)
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