Unemployment Insurance and Occupational Switching

Anna Houstecka.

(Universitat Autònoma de Barcelona).

Unemployment Insurance and Occupational Switching.

Abstract: “In this paper, I study the relationship between unemployment benefits and occupational switching. Using US data, I document two new facts. First, unemployed individuals who are eligible to higher unemployment benefits are less likely to switch occupation. Second, I show that conditional on switching occupation, individuals with higher unemployment benefits exit to occupations with higher requirements of cognitive skills. I then build a search model with heterogenous workers and jobs to study how unemployment benefits affect skill requirements and wages for workers who experience employment-unemployment-employment transitions. I find that mismatch between the worker’s skill and requirements decreases as unemployment benefits increase.”

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