How do unemployment insurance and recall expectations affect on-the-job search among workers who receive advance notice of layoff?

Abstract

This paper explores how advance notice of layoffs, recall (rehiring) expectations, and unemployment insurance (UI) benefits affected on-the-job search among a random sample of Arizona UI recipients in 1975-76. The analysis, which includes extensive controls for the characteristics of workers and their jobs, indicates that pre-unemployment search increased with length of notice and decreased with expected recall. Also, among workers not expecting recall, pre-unemployment search decreased with the level of UI benefits available after layoff. The authors argue that improved experience rating would encourage firms to give employees advance notice when layoffs are imminent, and reemployment bonuses for workers with zero or short unemployment spells would encourage early search.