ME  Vol.2 No.5 , November 2011
Unemployment Benefits and Unemployment
Abstract: This paper seeks to provide a simpler explanation of the Match Quality Hypothesis (MQH). For the less mathematically inclined, it avoids formal analysis and yet derives the relevant implications, i.e., if unemployed workers currently collecting unemployment benefits are given more benefits, both the average period of unemployment duration increases as well as the level of unemployment. To produce these effects, only one person behaving in this manner is required. We cite recent evidence supporting these implications. Examined are implications of this theorem for both U.S. and European regions where, in some cases, voluntarily unemployed workers are eligible for unemployment benefits. We question the importance of the notion that generous unemployment benefits that intensify searches for better jobs, and hence prolonged job searches, ultimately yield societal benefits.
Cite this paper: nullW. Beranek and D. Kamerschen, "Unemployment Benefits and Unemployment," Modern Economy, Vol. 2 No. 5, 2011, pp. 800-803. doi: 10.4236/me.2011.25088.

[1]   D. T. Mortensen, “Unemployment Insurance and Job Search Decisions,” Industrial and Labor Relations Review, Vol. 30, No. 4, 1977, pp. 505-517. doi:10.2307/2523111

[2]   D. Card and P. B. Levine, “Extended Benefits and the Durations of UI Spells: Endurance from the New Jersey Extended Beneficial Program,” Journal of Public Economics, Vol. 78, No. 1-2, 2000, pp. 107-138. doi:10.1016/S0047-2727(99)00113-9

[3]   R. Lavile, J. Van Ours and J. Zewimuller, “How Changes in Financial Incentives Affect the Duration of Unemployment,” Review of Economic Studies, Vol. 73, No. 4, 2006, pp. 1009-1038. doi:10.1111/j.1467-937X.2006.00406.x

[4]   K. Carling, P.-A. Edin, A. Hackman and B. Holmlund, “Unemployment Duration, Unemployment Benefits and Labor Market Programs in Sweden,” Journal of Public Economics, Vol. 59, No. 3, 1996, pp 313-334. doi:10.1016/0047-2727(95)01499-3

[5]   D. Acemoglu and R. Shimer, “Productivity Gains from Unemployment Insurance,” European Economic Review, Vol. 44, No. 7, 2000, pp. 1195-1224. doi:10.1016/S0014-2921(00)00035-0

[6]   B. Jovanovic, “Job Matching and the Theory of Turnover,” Journal of Political Economy, Vol. 87, No. 5, 1979, pp. 972-990. doi:10.1086/260808

[7]   M. Centeno, “The Match Gains from Unemployment In- surance,” Journal of Human Resources, Vol. 34, No. 3, 2004, pp. 839-863. doi:10.2307/3559000

[8]   R. Moffit, “Unemployment Insurance and the Distribution of Unemployment Spells,” Journal of Econometrics, Vol. 28, 1995, pp. 85-101.

[9]   R. Moffit and W. Nicholsen, “The Effect of Unemployment Insurance on the Unemployed; the Case of Federal Supported Benefits,” Review of Economics and Statistics, Vol. 64, No. 1, 1982, pp. 1-11. doi:10.2307/1937937

[10]   L. F. Katz and B. D. Meyer, “Unemployment Insurance, Recall Expectationsand Unemployment Outcomes,” Quar- terly Journal of Economics, Vol. 105, No. 4, 1990, pp. 973-1002. doi:10.2307/2937881

[11]   S. Nickell and R. D. Layard, “Labor Market Institutions and Economic Performance,” In: O. C. Ashenfelter and D. Card, Eds., Handbook of Labor Economics, Vol. 3, Part C, 1999, pp. 3029-3084.

[12]   S. Machin and A. Manning, “Causes and Consequences of Longterm Unemployment in Europe,” In: O. C. Ashen- felter and D. Card, Eds., Handbook of Labor Economics, Vol. 3, Part C, 1999, pp. 3085-3139.