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To appreciate the issues addressed in this study, a highly simple and stylized job search model is useful. In this theoretical model, unemployed persons search for two periods. In each period a wage offer w arrives drawn from a distribution of wages characterized by a density function f(w) with mean wage E(w). Suppose that unemployment insurance benefits of b are paid in the first period while no benefits are available in the second period of search. A person in the first period possessing a given wage offer has to decide whether to accept it and work both periods at that wage or to reject the offer, take the UI benefit in the first period, and hope to draw a better offer in the second period. If individuals use a discount factor ß to calculate present values, the expected discounted values of the two strategies - acceptance or rejection of the offer - can be summarized in the table below:

Pay-Offs to Acceptance and Rejection Strategies
Strategy	Period 1 Income	Period 2 Income	Discounted Expected Income
Acceptance Rejection	w b	w E(w)	w + ßw = (1 + ß)w b + ßE(w)

Unemployed persons in this situation will choose the strategy that maximizes their discounted expected income. This optimal choice can be characterized succinctly once the reservation wage is defined. The reservation wage w^r is the wage that just equates the two discounted expected income streams above. If a wage offer exceeds the reservation wage then the expected discounted income from accepting the offer exceeds that obtained from rejection. The opposite is true when the wage offer is lower than the reservation wage. The reservation wage is therefore the critical value which wage offers have to exceed in order to be accepted.

The reservation wage can be found by equating (1+ß)w and b + bE(w) and solving for the wage so as to obtain:

From this it is clear that the more generous unemployment insurance benefits become, the higher is the reservation wage. An increased reservation wage will have two consequences. First, raising the reservation wage increases the probability that an offer will be rejected and thus raises the average time spent unemployed. On the other hand, the existence of unemployment insurance permits workers to reject wage offers that are too low relativeto the wage distribution thus raising the quality of jobs on average. The effect of seasonal cycling can also be seen if the two periods of the model are interpreted as "off" and "on" seasons respectively. The existence of UI benefits allows seasonal workers to reject job offers from non-seasonal work in the off-season.

While this characterization is very simple it captures a logic that holds true even in more complicated multi-period models. The empirical analysis undertaken in this study permits such a generalized framework for the job search problem in which benefits last for varying lengths of time, offers may be drawn from different distributions for different individuals, and job characteristics such as hours worked and union status may matter along with the wage. The goal of the analysis is to see how changes to the UI system, the b variable above, have resulted in changes to job quality outcomes such as the wage.