Econometrica: May, 1996, Volume 64, Issue 3

Unemployment Insurance Rules, Joblessness, and Part-Time Work

https://doi.org/0012-9682(199605)64:3<647:UIRJAP>2.0.CO;2-Y
p. 647-682

Brian P. McCall

In most states, unemployment insurance recipients accepting part-time work can earn up to a specific amount (the "disregard") with no reduction in benefits. Benefits are then reduced on a dollar for dollar basis for earnings in excess of the disregard. The disregard varies both across states and within a state over time. This paper analyzes the effects of changes in the disregard on job search behavior. A continuous-time job search model is developed and under general conditions an increase in the disregard is shown to increase both the part-time and overall re-employment hazards. Data from the Current Population Survey's Displaced Worker Supplements are used to test these predictions. Estimates from a competing risks model with correlated risks and time-varying coefficients shows that increasing the disregard significantly increases the conditional probability of part-time re-employment during the first three months of joblessness.