THE DIFFERENTIAL IMPACT OF UNEMPLOYMENT-INSURANCE ON UNEMPLOYMENT DURATION BY INCOME LEVEL

While there is a vast literature on the effect of unemployment insuran ce on unemployment duration, in almost all of these studies the replac ement ratio is the key explanatory variable. Does not contest the almo st universal findings that the higher the ratio of unemployment income to that of previous earnings, the longer is unemployment duration, bu t finds that when pre-unemployment income itself is considered, durati on is positively related to that income. Supports the positive view of the merits of unemployment insurance. While past studies emphasize th e leisure aspect, unemployment insurance incorporates the ability to i mprove search through the use of unemployment insurance funds. This us e of funds is particularly applicable to high income recipients.