Abstract

This project investigates the mechanisms that determine the disincentive effect of Unemployment Insurance benefits (UIB). The goal here is to examine the high transition rate to employment at the end of UIB eligibility –the so called “spike at the exhaustion point”. Different theories with different policy implications have been proposed in the past to explain this phenomenon, but there is little evidence which of these theories explain reality best. Aim of this project is to test these different theories empirically using Information on search behavior in order to derive policy relevant implications. The main innovation of the project is to conduct a highly targeted survey in Germany with the support of the German Federal Employment Agency (BA). The survey will consist of a SMS (text messaging) survey to obtain high frequency data on job search behavior over an extended time period. This survey will be merged with German social security data (IEB) and will be targeted on unemployed individuals close to the cutoff of past employment durations for UIB extensions in Germany, thus allowing for detailed estimation of causal effects using a RD design.