Working Paper: NBER ID: w22411
Authors: Andrew C. Johnston; Alexandre Mas
Abstract: We examine how a 16-week cut in potential unemployment insurance (UI) duration in Missouri affected search behavior of UI recipients and the aggregate labor market. Using a regression discontinuity design (RDD), we estimate a marginal effect of maximum duration on UI and nonemployment spells of approximately 0.5 and 0.3 respectively. We use RDD estimates to simulate the unemployment rate assuming no market-level externalities. The simulated response closely approximates the estimated change in the unemployment rate following the benefit cut, suggesting that even in a period of high unemployment the labor market absorbed this influx of workers without crowding-out other jobseekers.
Keywords: Unemployment Insurance; Labor Supply; Benefit Cut
JEL Codes: E24; H0; J6; J64; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cut in potential UI duration (C41) | Increase in exit rate from UI (J65) |
| Cut in potential UI duration (C41) | Reduction in duration of UI receipt (J65) |
| Cut in potential UI duration (C41) | Increase in job search intensity (J29) |
| Cut in potential UI duration (C41) | No increase in employment rates after benefit exhaustion for long-term unemployed (J64) |
| Simulated unemployment rate closely matches actual change (J64) | Labor market absorbed influx of workers without displacing other job seekers (J69) |