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Unemployment Insurance Take-up Rates in an Equilibrium Search Model

Title:

Unemployment Insurance Take-up Rates in an Equilibrium Search Model

Auray, Stéphane, Fuller, David L. and Lkhagvasuren, Damba (2018) Unemployment Insurance Take-up Rates in an Equilibrium Search Model. European Economic Review . ISSN 00142921 (In Press)

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Official URL: http://dx.doi.org/10.1016/j.euroecorev.2018.11.005

Abstract

From 1989-2012 on average 23% of those eligible for unemployment insurance (UI) benefits in the US did not collect them. To understand the implications of these “unclaimed” benefits, we develop a directed search model with an endogenous UI take-up rate. In equilibrium, UI collectors have longer unemployment durations relative to non-collectors. The difference results from two forces, a consumption effect and a private information effect, as UI collection histories are unobservable. We characterize both effects analytically and quantitatively. With an endogenous take-up rate, the unemployment rate and average duration of unemployment respond significantly slower to changes in the UI benefit level, relative to the standard model with a 100% take-up rate. The private information effect on non-collector job finding rates plays an important role in this result.

Divisions:Concordia University > Faculty of Arts and Science > Economics
Item Type:Article
Refereed:Yes
Authors:Auray, Stéphane and Fuller, David L. and Lkhagvasuren, Damba
Journal or Publication:European Economic Review
Date:24 November 2018
Digital Object Identifier (DOI):10.1016/j.euroecorev.2018.11.005
Keywords:Unemployment insurance; Take-up; Calibration; Matching frictions; Search
ID Code:984723
Deposited By: MONIQUE LANE
Deposited On:30 Nov 2018 20:35
Last Modified:30 Nov 2018 20:35

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