TITLE:
Unemployment Benefits and Unemployment
AUTHORS:
William Beranek, David R. Kamerschen
KEYWORDS:
Unemployment, Unemployment Benefits, Match Quality Hypothesis
JOURNAL NAME:
Modern Economy,
Vol.2 No.5,
November
25,
2011
ABSTRACT: This paper seeks to provide a simpler explanation of the Match Quality Hypothesis (MQH). For the less mathematically inclined, it avoids formal analysis and yet derives the relevant implications, i.e., if unemployed workers currently collecting unemployment benefits are given more benefits, both the average period of unemployment duration increases as well as the level of unemployment. To produce these effects, only one person behaving in this manner is required. We cite recent evidence supporting these implications. Examined are implications of this theorem for both U.S. and European regions where, in some cases, voluntarily unemployed workers are eligible for unemployment benefits. We question the importance of the notion that generous unemployment benefits that intensify searches for better jobs, and hence prolonged job searches, ultimately yield societal benefits.