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Unemployment Insurance Generosity and Aggregate Employment

  • Christopher Boone
  • Arindrajit Dube
  • Lucas Goodman
  • Ethan Kaplan
American Economic Journal: Economic Policy
vol. 13, no. 2, May 2021
(pp. 58-99)
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Abstract

This paper examines the impact of unemployment insurance (UI ) on aggregate employment by exploiting cross-state variation in the maximum benefit duration during the Great Recession. Comparing adjacent counties located in neighboring states, there is no statistically significant impact of increasing UI generosity on aggregate employment. Point estimates are uniformly small in magnitude, and the most precise estimates rule out employment-to-population ratio reductions in excess of 0.35 percentage points from the UI extension. The results contrast with the negative effects implied by most micro-level labor supply studies and are consistent with both job rationing and aggregate demand channels.

Citation

Boone, Christopher, Arindrajit Dube, Lucas Goodman, and Ethan Kaplan. 2021. "Unemployment Insurance Generosity and Aggregate Employment." American Economic Journal: Economic Policy, 13 (2): 58-99. DOI: 10.1257/pol.20160613

Additional Materials

JEL Classification

  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • E32 Business Fluctuations; Cycles
  • J22 Time Allocation and Labor Supply
  • J23 Labor Demand
  • J65 Unemployment Insurance; Severance Pay; Plant Closings
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