Working Paper: NBER ID: w19048
Authors: Henry S. Farber; Robert G. Valletta
Abstract: In response to the Great Recession, the availability of unemployment insurance (UI) benefits was extended to an unprecedented 99 weeks in many U.S. states in the 2009-2012 period. We use matched monthly data from the CPS to exploit variation in the timing and size of the UI benefit extensions across states to estimate the overall impact of these extensions on individual exit from unemployment, and we compare the estimated impact with that for the prior extension of benefits during the much milder downturn in the early 2000s. In both periods, we find a small but statistically significant reduction in the unemployment exit rate and a small increase in the expected duration of unemployment. The effects on exits and duration are primarily due to a reduction in exits from the labor force rather than to a decrease in exits to employment (the job finding rate). Although the overall effect of UI extensions on exit from unemployment is small, it implies a substantial effect of extended benefits on the steady-state share of unemployment in the cross-section that is long-term.
Keywords: Unemployment Insurance; Labor Market; Unemployment Spells
JEL Codes: J64; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| UI extensions (Y20) | unemployment exit rate (J63) |
| UI extensions (Y20) | expected duration of unemployment spells (C41) |
| UI extensions (Y20) | exits from the labor force (J63) |
| UI extensions (Y20) | exits to employment (J68) |
| expected duration of unemployment spells (C41) | labor force attachment (J22) |
| UI extensions (Y20) | steady-state share of unemployment (J64) |