Responsible researcher: Bruno Benevit
Original Title: Unemployment Insurance and Job Search Behavior Get access Arrow
Authors: Iona Marinescu and Daphné Skandalis
Intervention Location: France
Sample Size: 457,000 worker-months
Variable of Main Interest: Reservation salary
Type of Intervention: Unemployment insurance
Methodology: OLS, Poisson Counting Model
Summary
Unemployment insurance is a tool that aims to reduce the impacts of job loss shocks on workers' income. However, the way the process of searching for a new job can imply different consequences of this type of policy in terms of the preferences of its beneficiaries. To verify how unemployment insurance affects such dynamics, this article used application data for job offers from France to evaluate how unemployment insurance impacts the effort to search for a new job and the beneficiaries' reservation salary. The results indicate that workers increase their search efforts for new jobs in the year before and after the end of the benefit to a similar extent, and that the salary desired by workers drops continuously throughout the unemployment insurance period.
Unemployment insurance seeks to soften the effects of income shocks caused by job loss, bringing greater income predictability to the worker. Economic literature highlights the existence of a stable consumption pattern for individuals throughout their lives, supporting the objective of this type of policy.
The process of searching for a new job, however, involves the investment of time and effort. Furthermore, the period of abstention from work results in the depreciation of human capital and/or its signaling in the labor market. In this sense, unemployment insurance can have repercussions on salary expectations and the search for a new job. The absence of an immediate financial need to relocate to the job market can lead to a reduction in effort in searching for a job. In addition to the depreciation of human capital they can cause, workers' reserve wages can also be negatively affected (MARINESCU; SKANDALIS, 2021). On the other hand, job search models predict that greater availability of time to relocate in the job market may imply an increase in the desired salary (CHETTY, 2008).
Unemployment insurance benefits in France can be claimed after losing your job by registering on the Public Employment Service (Pôle Emploi) platform. The platform allows employers to create standardized job advertisements, which candidates can apply to by filling out an online form. Approximately one-fifth of unemployed French workers have submitted an application to the search platform, and candidates are similar to the population of unemployed workers. Behavior on this platform is broadly representative of the French job market and the proportion of searches carried out on this channel can be considered exogenous (MARINESCU; SKANDALIS, 2021).
Eligibility for the program occurs if the beneficiary has worked for more than 4 months in the 28 months prior to involuntary job loss - for workers over 50 years of age, 36 months prior to job loss. The potential duration of benefits (DPB) depends on the number of days worked during this reference period, and cannot exceed two years for workers under 50 (three years for unemployed people aged 50 or over).
The value of benefits depends on wages received in the last 12 months, with a minimum and maximum limit. The net replacement rate is around 70% on average, which is lower than in most European countries. DPBs are higher compared to other European countries, and the most frequent DPBs observed in France are two and three years, the maximum limits for workers under and over 50 years old, respectively. After the end of benefits, and subject to the active search for a job, individuals can request assistance benefits.
The data considered in this study comprises observations of workers who began a period of unemployment between 2013 and 2017 and submitted at least one application on the platform during the period of unemployment (regardless of benefit eligibility). Data from the Public Employment Service platform were crossed with three other sets of administrative data, allowing the identification of the period of unemployment, value of unemployment insurance benefits, DPB of each unemployed person, periods of receipt of benefits, replacement rate, salary of previous work and period of relocation in the labor market.
The data was organized as a panel at unemployment period levels (monthly). The observations consider online search activities from the date of unemployment registration on the platform until the end of the unemployment period, for up to three years. This study evaluated two dimensions of job search behavior: (i) the effort in the search process for a new job – measured by the number of applications per month during the unemployment period –, and (ii) the reservation salary – measured by the monthly average of the salaries offered in the job advertisements sought by the workers.
To estimate the impact of unemployment insurance on behavior during the search for a new job, this study adopted several models to isolate the individual behavior of the unemployed. The analyzes considered unemployed workers ineligible for unemployment insurance and eligible unemployed workers with BPD between 12 and 24 months. Two samples were used: (i) the full sample – considering all observations of unemployment episodes –, and (ii) the balanced sample – considering only observations of unemployment episodes that lasted more than 3 years for the worker.
To estimate the impact on the number of applications, the Poisson counting method was used, and for the effect on the reservation salary, an ordinary least squares (OLS) model was estimated. The base model considered the variables referring to the period in relation to the DPB (assuming a value of 0 when ineligible) and the fixed effects of DPB to estimate the impact of unemployment insurance on the search behavior for a new job in the two years before and after the period end of the DPB. In order to correctly identify the impact of unemployment insurance on search behavior, the authors added the fixed effects of the total period unemployed (to control levels of effort among workers) and the period (month) in a situation of unemployment (to isolate the effect of unemployment insurance on the effect of the individual reaction of workers).
The authors also verified how the time in relation to the end of the benefit and unemployment time (years) impact the preferences of unemployed workers in the process of searching for a new job. To this end, the effects on salary measurement variables (log) were estimated for different periods: monthly, weekly, and hourly salaries. Furthermore, possible changes in preferences for different occupations with lower wages and similar occupations with lower wages were verified. Finally, it was also verified whether unemployment insurance induced the search for jobs with lower qualification requirements than those of unemployed workers and what impact it had on the number of applications for vacancies with contracts with no end date. Two models were adopted to verify the impact on these outcome variables, one considering the interaction of the period after the end of the benefit with a binary variable identifying wages below the distribution average and the other disregarding such interaction.
Estimates on the impact of unemployment insurance on the effort to search for a new job indicate that workers gradually significantly increase the number of applications until the benefit ends, when they reach their peak. The benefit termination period was followed by a gradual drop in the magnitude of the impact, although it remained significantly positive for all models that considered the fixed effects of the unemployment period. The magnitude of the effect in the termination period varied between 72% and 121%, and the effect under the model with both unemployment fixed effects (best specification) indicates a 100% increase in effort. The coefficients maintain their significance and behavior over the periods when considering the balanced sample, but with smaller magnitudes (approximately half the value).
Regarding the impacts on the target salary in the applications, the results demonstrated that the intended salary is significantly reduced gradually until the period in which the benefit ends, maintaining the magnitude of the effects for subsequent periods relatively stable when considering the models with the best adjustment. For these models, the coefficients for the period after the end of the DPB varied between -4.9% and -2.6% for the full sample and between -5.5% and 4.2% for the balanced sample.
The results of the analyzes on the impact on different salary variables indicated a considerably smaller reduction in weekly and hourly salary compared to the monthly salary. In other words, the observed reduction in the intended monthly salary can be explained by a predilection for shorter working hours after the policy intervention. Regarding the impacts on the quality of the desired vacancies in terms of required qualifications and type of contract, the estimates indicated that workers began to accept applying for more vacancies with qualifications below their level and reduced applications for positions with contracts with no defined term. . The results were robust for the two proposed models.
This article analyzed how unemployment insurance affects the behavior of unemployed workers when searching for a new job, based on data from a French job application platform. The authors specifically verified how this type of policy affects the preferences of the unemployed in this process in terms of search effort, salary expectations and quality of the desired positions around the period in which this benefit ends.
Through the adoption of several robust identification strategies, the results indicated the convergence of the efforts of the unemployed people assisted around the period when the benefit ended, when the greatest effort was observed – a result consistent with that observed in the literature. Unemployment insurance, however, led to a reduction in the number of vacancies sought by workers in terms of salary and job quality. The evidence from this study highlights the importance of understanding the unexpected negative effects of public policies on their target audience, enabling the improvement of current and future programs.
References
CHETTY, R. Moral Hazard versus Liquidity and Optimal Unemployment Insurance. Journal of Political Economy , vol. 116, no. 2, p. 173–234, apr. 2008.
MARINESCU, I.; SKANDALIS, D. Unemployment Insurance and Job Search Behavior. The Quarterly Journal of Economics , vol. 136, no. 2, p. 887–931, 24 Mar. 2021.
Check the Institution's registration in the e-MEC System here
© 2025 All Rights Reserved
