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Unemployment and Unemployment Insurance

Paper Session

Sunday, Jan. 6, 2019 10:15 AM - 12:15 PM

Hyatt Regency Atlanta, Hanover B
Hosted By: Labor and Employment Relations Association
  • Chair: Marta Lachowska, W.E. Upjohn Institute for Employment Research

Unemployment Benefit Extensions and the United States Macroeconomy: A Critical Assessment

Robert Valletta
,
Federal Reserve Bank of San Francisco

Abstract

In response to the 2007-09 Great Recession, the maximum duration of U.S. unemployment insurance (UI) benefits rose from the normal 26 weeks to an unprecedented 99 weeks for most recipients. Initial empirical research on the labor market impact of these UI extensions examined labor force outcomes using individual micro-data, focusing on transitions between labor market states and the duration of unemployment spells (e.g., Farber and Valletta 2015). Subsequent work has examined the aggregate (macro) labor market impacts of the UI extensions, accounting for a wider range of worker and employer responses than can be directly identified using micro-data. The results from this research vary widely, with some papers finding a near-zero aggregate impact (e.g., Boone et al. 2016) and others finding an effect large enough to account for a substantial share of the fluctuations in U.S. employment during the recession and subsequent recovery (e.g., Hagedorn et al. 2015). I provide a critical assessment of the approaches and findings from this macro-effects literature, which I bolster with direct analyses using aggregate data at the state and national level.

Job search behavior and unemployment insurance

Andrew Johnston
,
University of California-Merced
Maxim Massenkoff
,
University of California-Berkeley

Abstract

In models of job search, unemployment benefits lengthen unemployment duration by decreasing search effort and increasing job selectivity or the reservation wage, but few studies can shed light on these mechanisms. I provide new evidence on job search behaviors using audits of unemployment insurance claimants surveyed as part of the US Department of Labor's Benefit Accuracy Management program. When state unemployment is high, claimants have lower reservation wages and search for lower-paying occupations. Reservation wages are strongly predictive of reemployment earnings and, in a regression kink design, I find that they positively respond to unemployment benefits. Search effort (measured by the number of weekly work contacts) and occupational choice show no response to benefits.

Why Do Half of Unemployment Benefits Go Unclaimed?

David Fuller
,
University of Wisconsin-Oshkosh
Stephane Auray
,
CREST Ensai and ULCO
Nicolas Lepage-Saucier
,
CREST Ensai

Abstract

On average, only 50 percent of those eligible for unemployment insurance benefits actually collect them. We use a mixed proportional hazards model to estimate the joint decision to start collecting and the probability of returning to work. This approach yields two novel finding with policy implications. First, we find the benefit take-up decision is dynamic and jointly determined with the labor market participation decision. Second, for households with less income and liquidity, the need to find a job quickly appears to outweigh the liquidity provided by unemployment benefits, suggesting current benefit levels may be sub-optimally low.
Discussant(s)
Isaac Sorkin
,
Stanford University
Stephen A. Woodbury
,
Michigan State University
Christopher O'Leary
,
W.E. Upjohn Institute for Employment Research
JEL Classifications
  • J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers