Abstract
How the provision of unemployment benefits affects employment is a debated issue. We aim at complementing theoretical and empirical contributions to this debate with a laboratory experiment. We simulate a job market with search effort and labor force participation decisions while varying the maximum length of unemployment benefit eligibility. Our results reveal two separable, opposing effects. Individuals within the labor force search with lower effort when unemployment benefits are more generous. However, individuals are more likely to participate in the labor force and to actively search for a job.
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