Working Paper: NBER ID: w22447
Authors: Ioana Marinescu
Abstract: During the Great Recession, U.S. unemployment benefits were extended by up to 73 weeks. Theory predicts that extensions increase unemployment by discouraging job search, a partial equilibrium effect. Using data from the large job board CareerBuilder.com, I find that a 10% increase in benefit duration decreased state-level job applications by 1%, but had no robust effect on job vacancies. Job seekers thus faced reduced competition for jobs, a general equilibrium effect. Calibration implies that the general equilibrium effect reduces the impact of unemployment insurance on unemployment by 40%: increasing benefit duration by 10% increases unemployment by only 0.6% in equilibrium.
Keywords: unemployment insurance; job applications; vacancies; labor market; Great Recession
JEL Codes: J63; J64; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Search Externality (D62) | Job Applications (M51) |
| Potential Benefit Duration (PBD) (H43) | Aggregate Unemployment (J64) |
| Potential Benefit Duration (PBD) (H43) | Job Applications (M51) |
| Potential Benefit Duration (PBD) (H43) | Job Vacancies (J63) |
| Unemployment Insurance Extensions (J65) | Job Applications (M51) |
| Unemployment Insurance Extensions (J65) | Job Vacancies (J63) |