Working Paper: NBER ID: w28470
Authors: Arindrajit Dube
Abstract: The expiration of the temporary $600 boost to weekly UI benefits under the Federal Pandemic Unemployment Compensation (FPUC) led to a sharp, unprecedented, 98 percentage point reduction (on average) in the replacement rate during a time when employment was recovering during the Covid recession. Leveraging the considerable variation in this drop across states, I use a difference-in-differences event study design to estimate the macro employment effects. I find little impact of job gains from the benefit reduction, especially when I focus on groups (non-college graduates, and those from non-high-income households) that comprise of most UI recipients. The estimates rule out job gains implied by much of the micro UI duration elasticities from the existing literature.
Keywords: unemployment benefits; employment effects; COVID-19; federal pandemic unemployment compensation
JEL Codes: E24; E62; E65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| expiration of the federal pandemic unemployment compensation (FPUC) (J65) | job gains (J23) |
| reduction in unemployment benefit replacement rate (J65) | job gains (J23) |
| expiration of the federal pandemic unemployment compensation (FPUC) (J65) | employment changes (J63) |
| reduction in unemployment benefits (J65) | employment changes (J63) |
| demographic factors and state-level job losses (J21) | employment outcomes (J68) |