This paper studies how finite duration Unemployment Insurance (UI) benefit payments affect wage dispersion. It also provides a quantification of the implied re-entitlement effect. In a directed on-the-job search model, benefit duration is determined by recent employment history while benefit...

Wage dispersion is generated in a sequential search environment through heterogeneity in firm productivity along with an individual wage-effort trade-off. For a given degree of TFP dispersion, the framework can generate any amount of wage dispersion. Calibrated to generate realistic gains from...