Abstract
This paper investigates the impact of endogenous unemployment insurance (UI) extensions on the dynamics of unemployment and its duration structure in the US. Using a search and matching model with a rich set of worker heterogeneity, I allow for the maximum UI duration to depend on unemployment and for UI benefits to depend on worker characteristics. UI extensions have a large effect on long-term unemployment during the Great Recession via job search responses and a moderate effect on total unemployment via job separations. Disregarding rational expectations about the timing of UI extensions implies an overestimation of the unemployment rate by over 2 percentage points.
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