UNEMPLOYMENT-INSURANCE RULES, JOBLESSNESS, AND PART-TIME WORK

In most states, unemployment insurance recipients accepting part-time work can earn up to a specific amount (the ''disregard'') with no redu ction in benefits. Benefits are then reduced on a dollar for dollar ba sis for earnings in excess of the disregard. The disregard varies both across states and within a state over time. This paper analyzes the e ffects of changes in the disregard on job search behavior. A continuou s-time job search model is developed and under general conditions an i ncrease in the disregard is shown to increase both the part-time and o verall re-employment hazards. Data from the Current Population Survey' s Displaced Worker Supplements are used to test these predictions. Est imates from a competing risks model with correlated risks and time-var ying coefficients shows that increasing the disregard significantly in creases the conditional probability of part-time re-employment during the first three months of joblessness.