Working Paper: NBER ID: w31784
Authors: Miguel Acosta; Andreas I. Mueller; Emi Nakamura; J.N. Steinsson
Abstract: We study the macroeconomic effects of unemployment insurance (UI) benefit extensions in the United States at short and long durations. To do this, we develop a new state level dataset on trigger variables for UI extensions and a "UI benefit calculator" based on detailed legislative and administrative sources spanning five decades. Our identification approach exploits variation across states in the options governing the Extended Benefits program. We find that UI extensions during time periods when UI benefit durations are already long—such as in the Great Recession—have minimal effects. However, UI extensions when initial durations are shorter have substantial effects on the unemployment rate and the number of people receiving UI. Through the lens of a search-and-matching model, we show that our estimates are consistent with microeconomic estimates of the duration elasticity to UI, implying small general equilibrium effects of UI extensions.
Keywords: Unemployment Insurance; Macroeconomic Effects; Fiscal Stimulus; Labor Market Dynamics
JEL Codes: E2; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| UI extensions during periods of already long benefit durations (J65) | minimal effects on the unemployment rate (J65) |
| standard 13-week extension (J65) | unemployment (J64) |
| baseline potential benefit duration exceeds 60 weeks (J32) | negligible effect of UI extensions on unemployment (J65) |
| UI extensions provide fiscal stimulus (H39) | general equilibrium effects on unemployment are small (D59) |