nemployment Benefits in the United Kingdom: Deciphering the job search effect

Abstract

This thesis analyzes different effects of unemployment benefits on the duration of unemployment. It provides evidence for alternative explanations to the job search effect other than the moral hazard effect, more specifically, for a liquidity effect. The thesis presents a job search and matching model including the job search effect, the liquidity effect, the moral hazard effect and the job-creation effect. This liquidity effect can be identified due to the existence of incomplete credit and insurance markets. Moreover, the model offers testable predictions. Those predictions are tested using duration dependence analysis. The results of the statistical analysis offer robust evidence for the existence of a job search effect and the liquidity effect.