Labor Market Implications of Unempl oyment Benefit Extensions
Abstr act:
We measure the effect of unemployme nt benefit duration on employment. We exploit the variation induced by the decision of Congress in December 2013 not to reauthorize the unprecedented benefit extensions introduced during the Great Recession. Federal benefit e xtensions that ranged from 0 to 47 weeks across U.S. states at the beginnin g of December 2013 were abruptly cut to zero. To achieve identification we use the fact that this policy change was exogenous to cross-sectional diffe rences across U.S. states and we exploit a policy discontinuity at state bo rders. Next, we show that countercyclical unemployment benefit extensions c an lead to jobless recoveries. We augment the standard Mortensen-Pissarides model to incorporate unemployment benefit expiration and state-dependent e xtensions of unemployment benefits. We show that it is quantitatively consi stent with observed labor market dynamics, in particular the emergence of j obless recoveries after 1990. Furthermore, counterfactual experiments indic ate that unemployment benefits are quantitatively important in explaining j obless recoveries.
DTSTAMP:20260404T160006Z DTSTART:20151005T173000Z DTEND:20151005T190000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR