Working Paper: NBER ID: w2546
Authors: Bruce D. Meyer
Abstract: This paper tests the effects of the level and length of unemployment insurance (UI) benefits on unemployment durations. The paper particularly studies individual behavior during the weeks just prior to when benefits lapse. Higher UI benefits are found to have a strong negative effect on the probability of leaving unemployment. However, the probability of leaving unemployment rises dramatically just prior to when benefits lapse. When the length of benefits is extended, the probability of a spell ending is also very high in the week benefits were previously expected to lapse. Individual data are used with accurate information on spell durations, and the level and length of benefits. Semiparametric estimation techniques are used and compared to alternative approaches. The semiparametric approach yields more plausible estimates and provides useful diagnostics.
Keywords: Unemployment Insurance; Unemployment Durations; Labor Economics
JEL Codes: J64; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher UI benefits (J65) | Longer unemployment spells (J65) |
| Approaching benefit expiration (H55) | Higher probability of exiting unemployment (J65) |
| Length of benefits (J32) | Likelihood of a spell ending (C41) |