On the empirical relationship between unemployment duration, unemployment insurance and voluntary unemployment

This paper is concerned with the detection of the empirical consequences of nonstationarity in the search behavior of the unemployed. Initially, workers are laid off and forced to search while unemployed. Upon re-employment, individuals may choose an employment search strategy (continue search for better offers) or initiate unemployment (voluntarily) by quitting their job if it is optimal to do so. We refer to this strategy as 'voluntary' unemployment. We analyze how this decision is related to benefit exhaustion or, more generally, to the completed duration of unemployment and we are therefore able to find a relationship between unemployment duration and the incidence of voluntary unemployment. The model is estimated from a panel of young Canadian labor force participants.