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Testing Search Theory with Reemployment Bonus Experiments: Cross-Validation of Results from New Jersey and Illinois

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  • Phillip B. Levine

    (Princeton University)

Abstract

This paper assesses the ability of a simple search-theoretic model to explain the results of two controlled reemployment bonus experiments. The availability of two independent experiments with substantially different treatments allows for a rigorous test of the model. Parameters of the model are estimated by minimizing the distance between the observed and predicted aggregate response in each experiment, then cross-validated using the observed and predicted treatment response from the other experiment. The model is unable to predict an effect as large as that observed in one of the experiments. In addition, the model cannot explain the degree of individual-specific wage variability found in the data. The relative success of models with and without variable search intensity is also considered, but the statistical procedures cannot distinguish between them.

Suggested Citation

  • Phillip B. Levine, 1989. "Testing Search Theory with Reemployment Bonus Experiments: Cross-Validation of Results from New Jersey and Illinois," Working Papers 637, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:257
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    References listed on IDEAS

    as
    1. Devine, Theresa J. & Kiefer, Nicolas M., 1991. "Empirical Labor Economics: The Search Approach," OUP Catalogue, Oxford University Press, number 9780195059366.
    2. Woodbury, Stephen A & Spiegelman, Robert G, 1987. "Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois," American Economic Review, American Economic Association, vol. 77(4), pages 513-530, September.
    3. Lawrence F. Katz, 1986. "Layoffs, Recall and the Duration of Unemployment," NBER Working Papers 1825, National Bureau of Economic Research, Inc.
    4. repec:mpr:mprres:856 is not listed on IDEAS
    5. Bruce D. Meyer, 1988. "Implications of the Illinois Reemployment Bonus Experiments For Theories of Unemployment and Policy Design," NBER Working Papers 2783, National Bureau of Economic Research, Inc.
    6. Patricia Anderson & Walter Corson & Paul Decker, "undated". "The New Jersey Unemployment Insurance Reemployment Demonstration Project: Follow-Up Report," Mathematica Policy Research Reports eba060d41b8145b5a230fa76b, Mathematica Policy Research.
    7. Bruce D. Meyer, 1988. "Implications of the Illinois Reemployment Bonus Experiments for Theories of Unemployment and Policy Design," Working Papers 622, Princeton University, Department of Economics, Industrial Relations Section..
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Bruce D. Meyer, 1992. "Policy Lessons from the U.S. Unemployment Experiments," NBER Working Papers 4197, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    search theory; unemployment insurance; reemployment bonuses;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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