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Unemployment Insurance and Reservation Wages: Evidence from Administrative Data
While the reservation wage plays a key role in job search models, empirical evidence on its determinants is rather scarce, and in particular on how it is affected by Unemployment insurance (UI). In France, unemployed people must declare their reservation wages to the Public Employment Service when they register to claim UI benefits. We take advantage of these unique administrative data and a reform on UI eligibility rules to estimate the effect of the potential benefit duration (PBD) on reservation wages and on other dimensions of job selectivity, using a difference-in-difference strategy. We cannot reject that the PBD elasticity of the reservation wage is zero. Our results are precise and we can rule out elasticities larger than 0.006. The estimated elasticity of actual benefit duration is in line with the rest of the literature, around 0.3. Using a regression discontinuity design as an alternative identification strategy, we find similar results. Our results point to smaller effects of PBD on job selectivity than predicted by a calibrated non-stationary job-search model with endogenous search effort.
Thomas Le Barbanchon received a PhD in Economics from Ecole Polytechnique in 2012. He joined Bocconi University as an Assistant professor in the department of economics in 2015. Prior to this, he was a post-doc fellow at CREST from 2012 to 2015, and visited the department of economics at Harvard University during this period. Before 2012, he worked as an economist at the French Statistical Institute and at the Ministry of Labor. He is currently affiliated to IGIER and to the J-PAL.
His research interests are mostly empirical (in labor economics and public finance) though he also likes formal economic and econometric models. Thomas is interested in how labor markets work (job search and matching, labor flows, discrimination) and how they are influenced by institutions (labor contracts, unemployment insurance). Some of his recent publications look at the two-tier labor markets in France and Spain in the great recession, at the evaluation of labor market policy in equilibrium, at the unintended effects of anonymous resumes and at the effects of the potential duration of unemployment benefits on unemployment exits to work and match quality in France.
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