2007), “The Spike at the Bene…t Exhaustion: Leaving the Unemployment System or Starting a New Job,”.NBER Working paper 12893

One of the best-known empirical results in public \u85nance and labor economics is the spike in the exit rate from unemployment around the expiration of jobless bene\u85ts (see e.g., Robert Mo ¢ tt, 1985; Lawrence Katz and Bruce Meyer, 1990a; Katz and Meyer, 1990b). This sharp surge in the hazard rate is widely interpreted as evidence that recipients are waiting until their bene ts run out to return to work. The spike in exit rates has become a leading example of the distortionary e¤ects of unemployment insurance (UI) and social insurance programs more generally (see e.g., Martin Feldstein, 2005). In this paper, we present the results of a meta-analysis of the literature on unemployment exit rates around bene\u85t exhaustion, as well as new evidence using administrative data for a large sample of Austrian job losers. Our main \u85nding is that the way in which unemployment spells are measured has a large e¤ect on the magnitude of the spike at exhaustion, both in existing studies and in our Austrian data. Spikes are generally smaller when the spells are measured by the time to next job than when they are de\u85ned by the time spent on the unem-ployment system. In the Austrian data, we \u85nd a large spike in the exit rate from registered unemployment at the point of bene\u85t exhaustion, consistent with earlier studies (e.g., Rafael Lalive et. al., 2007). However, the hazard of re-employment rises only slightly at the same point. Even recalls to the previous employer which account for one-\u85fth of spell terminations in our data increase by no more than 20 % at bene\u85t exhaustion. We conclude that most job seekers in Austria are not waiting to return to work until their UI bene\u85ts are exhausted. Rather, a large fraction simply leave the unemployment registry once their bene\u85ts end and they are no longer required to register to maintain their eligibility for bene\u85ts. This \u85nding underscores the importance of distinguishing between the e¤ects of government programs such as UI on the decision to work vs. their auxiliary e¤ects on the classi cation of non-working time.2 The e¤ect of UI on whether individuals choose to b