Job Search Autonomy

A typical reaction to the moral hazard problem in unemployment insurance (UI) is to impose requirements (backed by sanctions) on the quantity of job search, aimed at ensuring sufficient levels of effort. However, is this the most effective policy strategy? It does neither take into account the intrinsic motivation of the job seeker nor the quality of the targeted search. An alternative policy strategy that encompasses such goals is to focus on job search autonomy.

Exploiting a policy change in a region in Switzerland which followed this aim, we evaluate the job seeker’s reaction to being granted more autonomy. Using rich procedural register data, we document the effects on quantitative effort, scope of search and ultimately on unemployment duration and earnings in the found job.

Our results show that the policy change increased the average duration of unemployment spells in the area by about 8%, while increasing average re-employment earnings by about 3%. Results are heterogenous, a main driver of the variety is the interplay of effort delivery and local labour market conditions, notably tightness. This finding highlights the relevance of search externalities. Furthermore, we provide some evidence of labour demand effects.

Joint work: Patrick Arni, Amelie Schiprowski

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