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Expectations of Unemployment Insurance and Unemployment Duration

Journal of Labor Economics 1998 16(3), 630-666
Over the years there have been frequent changes in unemployment insurance (UI) benefits. Such changes could influence spells in progress as well as future spells. If individuals anticipate changes, they are likely to adjust their behavior. The effect of changes in benefits on unemployment duration, therefore, will be difficult to predict accurately without accounting for individual expectations. This article investigates the extent to which individuals anticipate changes in UI entitlement. The results suggest that individuals have significant, although not perfect, foresight about changes in UI provisions. Assuming perfect foresight might represent actual expectations more closely than assuming no foresight.