• Journal of Labour Economics
• /
• v.39 no.1
• /
• pp.1-31
• /
• 2016

This paper investigates the cyclical behavior of UI benefit take-up rate, the share of unemployed persons who are eligible for job seekers' allowances(JSA) and actually receive them. Using Korea's Employment Insurance DB, it also identifies the factors linked to the decision to take up job seekers' allowances. The results show that the take-up rate is countercyclical and leads both unemployment rate and Coincident Composite Index cyclical component by 6 months and is positively correlated with replacement rate and benefit duration, suggesting that extending benefit duration and raising benefit level can boost benefit claims to increase take-up rates in Korea.

• KDI Journal of Economic Policy
• /
• v.32 no.1
• /
• pp.131-169
• /
• 2010

I develop a matching model in which risk-averse workers face borrowing constraints and make a labor force participation decision as well as a job search decision. A sharp distinction between unemployment and out of the labor force is made: those who look for work for a certain period but find no job are classified as the unemployed and those who do not look for work are classified as those out of the labor force. In the model, the job search decision consists of two steps. First, each individual who is not working obtains information about employment opportunities. Second, each individual who decides to search has to take costly actions to find a job. Since individuals differ with respect to asset holdings, they have different reservation job-finding probabilities at which an individual is indifferent between searching and not searching. Individuals, who have large asset holdings and thereby are less likely to participate in the labor market, have high reservation job-finding probability, and they are less likely to search if they have less quality of information. In other words, if individuals with large asset holdings search for job, they must have very high quality of information and face very high actual job-finding probability. On the other hand, individuals with small asset holdings have low reservation job-finding probability and they are likely to search for less quality of information. They face very low actual job-finding probability and seem to remain unemployed for a long time. Therefore, differences in the quality of information explain heterogeneous job search decisions among individuals as well as higher job finding probability for those who reenter the labor market than for those who remain in the labor force. The effect of the extended maximum duration of unemployment insurance benefits on the aggregate labor market and the labor market flows is investigated. The benchmark benefit duration is set to three months. As maximum benefit duration is extended up to six months, the employment-population ratio decreases while the unemployment rate increases because individuals who are eligible for benefits have strong incentives to remain unemployed and decide to search even if they obtain less quality of information, which leads to low job-finding probability and then high unemployment rate. Then, the vacancy-unemployment ratio decreases and, in turn, the job-finding probability for both the unemployed and those out of the labor force decrease. Finally, the outflow from nonparticipation decreases with benefit duration because the equilibrium job-finding probability decreases. As the job-finding probability decreases, those who are out of the labor force are less likely to search for the same quality of information. I also consider the matching model with two states of employment and unemployment. Compared to the results of the two-state model, the simulated effects of changes in benefit duration on the aggregate labor market and the labor market flows are quite large and significant.

• The Journal of Korean Institute for Practical Engineering Education
• /
• v.4 no.2
• /
• pp.144-149
• /
• 2012

This paper reviews the uncovered people of the Korean Employment Insurance System (EIS) and analyzes policy options for minimizing the dead zone of the EIS. There are several policy options such as subsidizing insurance premium to employers and employees of small companies, extending coverage of excluded groups, relaxing qualifications of unemployment benefits and increasing benefit period and level, introducing the unemployment assistance system, introducing the unemployment insurance savings account system, extending coverage to non-wage workers and individualizing package services. According to the survey to the specialists and comparative evaluation criteria, the best policy option to minimize the dead zone of the EIS was to activate individualizing package services of intensive consultation, job place services, tailored vocational training, income support, daycare services, etc. to cure complex employment barriers of job seekers.