MACRO: Job Search, Job Findings and the Role of Unemployment Insurance History; Professor Similan Rujiwattanapong (Waseda University)

Abstract

Standard search theory suggests that (1) job search intensity increases with the relative gain from searching, and that (2) job search intensity increases the job finding probability. Firstly, this paper presents new empirical findings that challenge these theoretical predictions when workers are categorised by their unemployment insurance (UI) history. Unemployed workers who are either current or former UI recipients search harder than those who never take up UI during their current unemployment spells. What's more, despite their higher search intensity, those with UI history have a lower probability of finding a job. Subsequently, I introduce inefficient job search, consistent with these empirical findings, to an otherwise standard equilibrium search-and-matching model with endogenous search intensity. Three key results follow from the introduction of inefficient job search: (1) it dampens labour market fluctuations, (2) it improves the model's ability to match the persistence of unemployment and its duration, and (3) it significantly moderates the macroeconomic effects of UI extensions.