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Assessing the effects of reemployment bonuses on job search: A regression discontinuity approach

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  • Ahn, Taehyun

Abstract

This study examines the impacts of reemployment bonuses, that is, the incentive payments to unemployment insurance (UI) recipients who find a job within a specified period, using Korean data. A sharp discontinuity in treatment assignment at age 55 identifies the effect of increased reemployment bonuses on unemployment duration and on subsequent job duration. The results indicate that increases in the reemployment bonus boost the job-finding hazards of UI claimants early in their unemployment spells during the bonus qualification period and significantly shorten the duration of UI spells by 0.16 to 0.42 months (0.68 to 1.82 weeks). In addition, employment stability is not significantly affected by an increased bonus, which implies no negative influence of the bonus on subsequent job match quality. The simulated estimates show that the increase in tax revenue and the decrease in UI benefit payment caused by the behavioral response of UI recipients are large enough to offset the increased cost of the reemployment bonus.

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  • Ahn, Taehyun, 2018. "Assessing the effects of reemployment bonuses on job search: A regression discontinuity approach," Journal of Public Economics, Elsevier, vol. 165(C), pages 82-100.
    • Handle: RePEc:eee:pubeco:v:165:y:2018:i:c:p:82-100
    DOI: 10.1016/j.jpubeco.2018.07.003
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    2. Kunz, Johannes S. & Zhu, Anna, 2023. "Welfare Reform and Migrant's Long-Term Labor Market Integration," IZA Discussion Papers 16285, Institute of Labor Economics (IZA).
    3. Huang, Po-Chun & Yang, Tzu-Ting, 2021. "The welfare effects of extending unemployment benefits: Evidence from re-employment and unemployment transfers," Journal of Public Economics, Elsevier, vol. 202(C).
    4. Amorim, Domingos Isaias Maia & Tabosa, Francisco José Silva & Almeida, Alexandre Nunes & Castelar, Pablo Urano de Carvalho, 2023. "The impact of unemployment insurance on reinsertion wages in 2015 in the rural environment of Brazil," Revista de Economia e Sociologia Rural (RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 61(1), January.
    5. Hobbs, Duncan & Strain, Michael R., 2024. "Do Reemployment Bonuses Increase Employment? Evidence from the Idaho Return to Work Bonus Program," IZA Discussion Papers 16924, Institute of Labor Economics (IZA).
    6. Johannes Kunz & Anna Zhu, 2023. "Welfare Reform and Migrant’s Long-term Labor Market Integration," Papers 2023-05, Centre for Health Economics, Monash University.

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    More about this item

    Keywords

    Reemployment bonus; Unemployment insurance; Regression discontinuity;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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