Seminar Reducing Mandatory Job Applications in Unemployment Insurance

Abstract

We estimate the effects of a large-scale reduction in job applications by unemployment benefit recipients. We exploit a policy experiment in Switzerland, where a subset of Public Employment Services significantly reduced the number of required applications and vacancy referrals. Using detailed administrative data and difference-in-differences designs, we find that the policy change led to an increase of about 6% in the average duration of unemployment spells. Based on additional variation in caseworkers' pre-reform use of referrals, we show that the reduction in application quantity (search requirement) and the increase in selectivity (vacancy referrals) each account for about half of this effect. Our estimates suggest an elasticity of job finding to applications of approximately 0.13. Finally, the policy change led to a 2% average increase in reemployment earnings, primarily driven by the reduced use of vacancy referrals. The findings suggest that policies restricting individuals' selectivity in job search involve significant trade-offs between unemployment duration and reemployment earnings.