Extended Unemployment Insurance Research Articles

AGE DISCONTINUITY AND NONEMPLOYMENT BENEFIT POLICY EVALUATION THROUGH THE LENS OF JOB SEARCH THEORY

AbstractRecent papers use regression discontinuity designs (RDDs) based on age discontinuity to evaluate social assistance (SA) and unemployment insurance (UI) extension policies. Job search theory predicts that such designs generate biased estimates of the policy‐relevant treatment effect. Owing to market frictions, people below the age threshold modify their search behavior in expectation of future eligibility. We use a job search model to quantify the biases on various datasets in the literature. The impacts of SA benefits on employment are underestimated, whereas those of UI extensions on nonemployment duration are overestimated. The article provides insights for RDD evaluations of age‐discontinuous policies.

The Macroeconomic Effects of Unemployment Insurance Extensions: A Policy Rule-Based Identification Approach

The Macroeconomic Effects of Unemployment Insurance Extensions: A Policy Rule-Based Identification Approach

The Effect of Extended Unemployment Insurance Generosity on Population Mental Health

This study contributes to a small but growing literature on the health effects of unemployment insurance (UI) by examining the impact of extended benefit generosity during the Great Recession on population mental health. Using data from the 2003–13 Behavioral Risk Factor Surveillance System as well as cross-state and time series variation in UI policies, we estimate that a one standard deviation (or $1,000) increase in UI generosity is associated with a 5.1 (0.5) percent improvement in self-reported mental health among the unemployed. We also provide evidence for the validity of our research design through an event study model and supplementary regressions that incorporate county or county-by-time fixed effects. However, we find no definitive evidence that UI affects general/physical health, health insurance, access to care, or health behaviors.

Tracking the impact of COVID-19 on economic inequality at high frequency.

Pandemics have historically had a significant impact on economic inequality. However, official inequality statistics are only available at low frequency and with considerable delay, which challenges policymakers in their objective to mitigate inequality and fine-tune public policies. We show that using data from bank records it is possible to measure economic inequality at high frequency. The approach proposed in this paper allows measuring, timely and accurately, the impact on inequality of fast-unfolding crises, like the COVID-19 pandemic. Applying this approach to data from a representative sample of over three million residents of Spain we find that, absent government intervention, inequality would have increased by almost 30% in just one month. The granularity of the data allows analyzing with great detail the sources of the increases in inequality. In the Spanish case we find that it is primarily driven by job losses and wage cuts experienced by low-wage earners. Government support, in particular extended unemployment insurance and benefits for furloughed workers, were generally effective at mitigating the increase in inequality, though less so among young people and foreign-born workers. Therefore, our approach provides knowledge on the evolution of inequality at high frequency, the effectiveness of public policies in mitigating the increase of inequality and the subgroups of the population most affected by the changes in inequality. This information is fundamental to fine-tune public policies on the wake of a fast-moving pandemic like the COVID-19.

Acts of Congress and COVID-19: A Literature Review on the Impact of Increased Unemployment Insurance Benefits and Stimulus Checks

Congress passed the first COVID-19 relief package for businesses and individuals in March 2020, when the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted, providing, among other things, one-time stimulus checks for individuals, extended unemployment insurance (UI) benefits, relief for state and local governments, liability protection, and the Paycheck Protection Program for small-business loan forgiveness.

Gross Labor Market Flows, Self-Employment, and Unemployment Insurance

In the data, entrepreneurship contributes to the micro and macro-level patterns of gross labor market flows and the selection into that occupation is highly responsive to labor market policy changes. Using an occupational choice model of employment, unemployment, and entrepreneurship, we show that search frictions over all three occupations and a technology letting entrepreneurs produce with their own labor, business capital, or both, are pivotal in rationalizing observed aggregate gross flows and behaviors along the wealth and ability dimensions. The responsiveness of our model flows to variations in unemployment insurance generosity is consistent with US empirical estimates. Changes in the relative riskiness of occupations drive this responsiveness. In turn, beyond the direct effects on unemployment, large reallocations between entrepreneurship and employment appear, shaping aggregate occupational shares. Using our framework, we show that the successive unemployment insurance extensions during the Great Recession have decreased the entrepreneurship rate by 0.4pp.

Evaluating the Welfare Effects of Extending Unemployment Insurance Benefits: Evidence from Two Natural Experiments

This paper estimates the welfare gain (i.e. ratio of liquidity to moral hazard effect) of extending UI benefits, using two natural experiments in Taiwan: a three-month benefits extension for middle-aged job losers and the introduction of a re-employment bonus. Our strategy exploits the fact that a re-employment bonus affects an individual's search efforts only through the moral hazard effect. Therefore, we recover liquidity effects by estimating the responses of the search effort to a UI extension and a re-employment bonus. We find that the estimated liquidity-to-moral hazard ratio of extending UI benefits is around 3.9, suggesting that the welfare gain of extending potential benefit duration is substantially larger than that of increasing benefit level.

Revisiting the Effects of Unemployment Insurance Extensions on Unemployment: A Measurement‑Error‑Corrected Regression Discontinuity Approach

This study documents two potential biases in recent analyses of UI benefit extensions using boundary-based identification: bias from using county-level aggregates and bias from across-border policy spillovers. To examine the first bias, the analysis uses a regression discontinuity approach that accounts for measurement error in county-level aggregates. These results suggest much smaller effects than previous studies, casting doubt on the applicability of border-based designs. The analysis then shows substantial spillover effects of UI benefit duration on across-border work patterns, consistent with increased tightness in high-benefit states and providing evidence against a dominant vacancy reduction response to UI extensions. (JEL E24, E32, J22, J64, J65)

Unemployment Dynamics and Endogenous Unemployment Insurance Extensions

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.

Acts of Congress and COVID-19: A Literature Review on the Impact of Increased Unemployment Insurance Benefits and Stimulus Checks

This Note is meant to present an overview of what economists have analyzed regarding the implications of two main components of the CARES Act that impact individuals: the increased UI benefits and the stimulus checks. We present the findings from the literature on these two policies with an eye on potential future governmental interventions.

The Equilibrium and Spillover Effects of Early Retirement

This paper examines the labor market effects of unemployment insurance extensions. It uses administrative Social Security matched employer-employee data from Austria. Critical components of the analysis are effects on wages as well as retirement/job separation effects.

Revisiting the Effects of Unemployment Insurance Extensions on Unemployment: A Measurement Error-Corrected Regression Discontinuity Approach

The extension of Unemployment Insurance (UI) benefits was a key policy response to the Great Recession. However, these benefit extensions may have had detrimental labor market effects. While evidence on the individual labor supply response indicates small effects on unemployment, recent work by Hagedorn et al. (2015) uses a county border pair identification strategy to find that the total effects inclusive of effects on labor demand are substantially larger. By focusing on variation within border county pairs, this identification strategy requires counties in the pairs to be similar in terms of unobservable factors. We explore this assumption using an alternative regression discontinuity approach that controls for changes in unobservables by distance to the border. To do so, we must account for measurement error induced by using county-level aggregates. These new results provide no evidence of a large change in unemployment induced by differences in UI generosity across state boundaries. Further analysis suggests that individuals respond to UI benefit differences across boundaries by targeting job search in high-benefit states, thereby raising concerns of treatment spillovers in this setting. Taken together, these two results suggest that the effect of UI benefit extensions on unemployment remains an open question.

A Quantum of Solace – An Examination of the Voluntary Extended Unemployment Insurance for the Self-employed in Germany

Abstract Self-employment has become an increasingly important part of labour market participation. In order to provide social protection against the risk of unemployment in case of business failure, Germany introduced a voluntary extended unemployment insurance for self-employed persons in 2006. We discuss the concept of this insurance and its crucial features. Based on survey data we furthermore analyse whether adverse selection processes occur. Summing up we conclude that the insurance option is a reasonable supplement of the existing socio-political schemes and is used mainly in line with the objectives. Ein Quantum Trost – Eine Untersuchung der freiwilligen Arbeitslosenversicherung fur Selbststandige in Deutschland In den letzten Jahrzehnten hat die berufliche Selbststandigkeit als eine Form der Erwerbsbeteiligung zunehmend an Bedeutung gewonnen. Scheitert die Grundung, droht den Selbststandigen allerdings der finanzielle und soziale Absturz. Um dieses Risiko zu verringern, haben Grunderinnen und Gr...

The Effect of Unemployment Benefits and Nonemployment Durations on Wages

We estimate that unemployment insurance (UI) extensions reduce reemployment wages using sharp age discontinuities in UI eligibility in Germany. We show this effect combines two key policy parameters: the effect of UI on reservation wages and the effect of nonemployment durations on wage offers. Our framework implies if UI extensions do not affect wages conditional on duration, then reservation wages do not bind. We derive resulting instrumental variable estimates for the effect of nonemployment durations on wage offers and bounds for reservation wage effects. The effect of UI on wages we find arises mainly from substantial negative nonemployment duration effects. (JEL J31, J64, J65)

Extended Unemployment Benefits and Early Retirement: Program Complementarity and Program Substitution

We explore how extended unemployment insurance (UI) benefits for older workers affect early retirement and welfare. We argue that extending UI benefits generates program complementarity (more labor market exits and disability benefit take-up in the future) and program substitution (less disability benefit take-up in the present). Exploiting a policy change in Austria, which extended UI benefits to 4 years, we find program complementarity effects for workers aged 50+ and program substitution effects for workers aged 55+. We apply the Baily-Chetty formula for optimal UI to account for complementarity and substitution, showing that UI benefits for older workers were too generous. (JEL J14, J22, J26, J65)

The effect of extended unemployment insurance benefits: evidence from the 2012-2013 phase-out

Unemployment Insurance benefit durations were extended during the Great Recession, reaching 99 weeks for most recipients. The extensions were rolled back and eventually terminated by the end of 2013. Using matched CPS data from 2008-2014, we estimate the effect of extended benefits on unemployment exits separately during the earlier period of benefit expansion and the later period of rollback. In both periods, we find little or no effect on job-finding but a reduction in labor force exits due to benefit availability. We estimate that the rollbacks reduced the labor force participation rate by about 0.1 percentage point in early 2014.

The Effect of Extended Unemployment Insurance Benefits: Evidence from the 2012–2013 Phase-Out

Unemployment Insurance benefit durations were extended during the Great Recession, reaching 99 weeks for most recipients. The extensions were rolled back and eventually terminated by the end of 2013. Using matched CPS data from 2008-2014, we estimate the effect of extended benefits on unemployment exits separately during the earlier period of benefit expansion and the later period of rollback. In both periods, we find little or no effect on job-finding but a reduction in labor force exits due to benefit availability. We estimate that the rollbacks reduced the labor force participation rate by about 0.1 percentage point in early 2014.

The Effect of Extended Unemployment Insurance Benefits: Evidence from the 2012-2013 Phase-Out

The Effect of Extended Unemployment Insurance Benefits: Evidence from the 2012-2013 Phase-Out

Extended Unemployment Insurance and Job Search: Evidence from Time Use Data

Abstract In this paper, I investigate the effect of extended unemployment insurance (UI) coverage in the United States in recent years on job search. The U.S. government extended UI benefits in several phases in 2008–2009, increasing the duration of the benefits to a maximum of 99 weeks, up from the regular 26 weeks. Using the American Time Use Survey (ATUS) data, I find that women are more sensitive to the extended UI benefits than men. Difference-in-differences estimation shows that the average effect of the UI extensions for women is over a 10 percentage points decline in the probability of job search. However, I do not find any statistically significant effect on men.

Reassessing the Effects of Extending Unemployment Insurance Benefits

To deal with the high level of unemployment during the Great Recession, lawmakers extended the availability of unemployment benefits—all the way to 99 weeks in the states where unemployment was highest. A recent study has found that the extensions served to increase unemployment significantly by putting upward pressure on wages, leading to less jobs creation by firms. We replicate the methodology of this study with an updated and longer sample and find a much smaller impact. We estimate that the impact of extending benefits on unemployment through wages and job creation can, at its highest, account for only one-fourth of the increase in the unemployment rate; an impact that is much lower than other estimates in the literature.