This paper provides revealed-preference estimates of the monetary value to workers of a lower unemployment rate at the time of job separation. By examining the decision between reenlisting and exiting the military, we find that service members would sacrifice 1.5-2 percent in earnings to avoid a 1 percentage point increase in the home-state unemployment rate during job search. Comparing these quantities to realized earnings losses for those who separate suggests that the value of non-work time and other factors (e.g., private and public transfers) offset less than one-third of the earnings losses caused by exiting the military into a weak labor market.
"Paying to Avoid Recession: Using Reenlistment to Estimate the Cost of Unemployment."
American Economic Journal: Applied Economics,
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Wage Level and Structure; Wage Differentials
Public Sector Labor Markets
Unemployment: Models, Duration, Incidence, and Job Search