Unemployment Insurance Generosity and Aggregate Employment
- American Economic Journal: Economic Policy (Forthcoming)
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.
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