Working Paper: NBER ID: w30252
Authors: Daphne Skandalis; Ioana Marinescu; Maxim N. Massenkoff
Abstract: The decentralized US unemployment insurance (UI) system lets states decide on key rules. Decentralization could help states efficiently adapt to local economic conditions, but it could also generate racial inequality. We build a novel nationally representative dataset of UI claimants and document a 18:3% gap in UI entitlements between Black and white claimants. After accounting for claimants' work history, we show that state rules differences alone create a 8:4% racial gap. Yet, our welfare analysis indicates that state rules differences are inefficient. Reducing UI rule disparities across states would thus enhance both racial equity and economic efficiency.
Keywords: Unemployment Insurance; Racial Inequality; State Rules
JEL Codes: J65; J7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| state differences in UI rules (J65) | racial inequality in benefits received by black and white claimants (J78) |
| racial differences in work history (J79) | reduction in the replacement rate for black claimants (J79) |
| state-specific rules differences (H73) | reduction in the replacement rate for black claimants (J79) |
| (racial differences in work history + state-specific rules differences) (J79) | residual racial gap in UI entitlements (J79) |
| state rules (H70) | disparities in UI entitlements (J65) |
| increased UI benefits (J65) | higher marginal welfare effect in states with a higher share of black claimants (D69) |
| harmonizing UI rules across states (L15) | reduce racial inequality (I24) |