Find a job now, start working later: Does unemployment insurance subsidize leisure?

Aperçu

Résumé (français)

Veuillez noter que les résumés n'apparaissent que dans la langue de la publication et peuvent ne pas avoir de traduction.

Résumé (anglais)

Distorting incentives is a major concern when implementing Unemployment Insurance (UI). In particular, UI benefits tend to decrease job search and increase the reservation wage. Yet, UI could also be prone to moral hazard through another unexplored channel: postponing job start upon ending a job. This paper develops a theoretical job search model that allows for a delayed job start. Then, the extent to which unemployed individuals delay job start after ending a job is assessed using the Canadian Survey of Labour and Income Dynamics. I find that 17% of all benefits paid are paid to individuals who have already found a job, but have not started working yet. I find that individuals who accepted an offer before benefit exhaustion delay job start by 3.9 weeks on average, whereas the average delay is respectively 1.8 and 2.3 weeks for those who accepted a job after exhaustion and for non-recipients. The survival analysis shows that the job starting rate upon acceptance of a job offer is much higher both in the month prior to exhaustion and after the benefits are exhausted, as well as for non-recipients. Although no causal effect can be formally identified, this suggests that some individuals take advantage of the availability of Unemployment Insurance benefits to postpone job start.