Job Rationing in Recessions: Evidence from Work-Search Requirements
Thursday, November 12, 2015 : 2:25 PM
Orchid A (Hyatt Regency Miami)
*Names in bold indicate Presenter
The last decade has seen a flurry of changes to unemployment insurance (UI) systems as policymakers have tried to shorten the unemployment rolls and support weak UI budgets. Many states have increased the work-search requirements for UI claimants in an effort to raise the disutility of claiming and match claimants with employers. However, the effects of these changes are initially unclear: canonical search-and-matching models suggest increased search effort will reduce unemployment, while job-rationing models suggest that the number of jobs is limited in weak labor markets. I compile novel data on work-search rules and use changes in them as plausibly exogenous variation in worker search effort. I show that increases in state UI search requirements are associated with increased search effort as measured by a number of proxies. However, these increased efforts translate into only marginally shorter unemployment durations on average. Using a number of different identification strategies, I show that there is heterogeneity in the effects across labor market conditions and that search requirements are relatively less effective in weak labor markets. The results suggest that the effectiveness of job-search policies may be limited by the rationing of jobs in recessions.