A test of the effect of benefits on search activity in a model of endogenous job offer arrivals

Abstract

This paper endogenises the job offer arrival rate in a standard search model in order to test the hypothesis that unemployment-related benefits may affect the job search behaviour of unemployed workers independently of any reservation wage effect. Using a pooled cross-section of 1484 unemployed British men from the 1979 to 1982 General Household Surveys, we find that the level of benefit has no significant effect on unemployed search behaviour. Factors which do not have an important impact on search activity include: age, unemployment duration, occupation, and education level. Further, local labour market conditions affect only the job search behaviour of the short-term unemployed