Econometrica: May 1996, Volume 64, Issue 3
Unemployment Insurance Rules, Joblessness, and Part-Time Work
Brian P. McCallIn most states, unemployment insurance recipients accepting part-time work can earn up to a specific amount (the "disregard") with no reduction in benefits. Benefits are then reduced on a dollar for dollar basis for earnings in excess of the disregard. The disregard varies both across states and within a state over time. This paper analyzes the effects of changes in the disregard on job search behavior. A continuous-time job search model is developed and under general conditions an increase in the disregard is shown to increase both the part-time and overall re-employment hazards. Data from the Current Population Survey's Displaced Worker Supplements are used to test these predictions. Estimates from a competing risks model with correlated risks and time-varying coefficients shows that increasing the disregard significantly increases the conditional probability of part-time re-employment during the first three months of joblessness.
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