NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Samuel G. Young

Department of Economics
Massachusetts Institute of Technology
77 Massachusetts Avenue
Cambridge, MA 02139

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Massachusetts Institute of Technology

NBER Working Papers and Publications

November 2018Wages and the Value of Nonemployment
with Simon Jäger, Benjamin Schoefer, Josef Zweimüller: w25230
Nonemployment is often posited as a worker’s outside option in wage setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes in the value of nonemployment among initially employed workers. Our quasi-experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit changes: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than $0.03. The insensitivity holds even among workers with low wages and high predicted unemployment duration, and among job switchers and recently unemployed workers. ...
 
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