The Backward Bending Search Intensity Supply Curve: How the Job Finding Rate Affects the Unemployed's Search Effort
Early Career Research Award
During the Great Recession of 2007 the number of open positions per unemployed workers, also known as labor market tightness, dropped by two-thirds, prompting an unprecedented extension in the length a claimant can collect unemployment insurance (UI) to 99 weeks at an expense to date of $140 billion. While it is well established that extending UI will adversely effect search intensity, the effect of the downturn itself on search effort is unclear. As a result, policymakers are in the dark as to whether UI extensions exacerbate already low search effort during recessions or, more benignly, reduce excessive search which causes congestion in the labor market. The proposed project develops a search model, which implies that job search effort is positively related to labor market conditions at low levels of market tightness and negatively related at high levels, forming a backward bending search intensity supply curve. The theory also implies the supply of search intensity declines with the worker’s aversion to risk. The project will test these implications empirically using a sample of unemployment spells from the National Longitudinal Survey of Youth 1997 and a measure of labor market tightness constructed from Bureau of Labor Statistics’ figures and unpublished data from the Conference Board.