Labor Market Responses to Unemployment Insurance: The Role of Heterogeneity

Serdar Birinci and Kurt See

American Economic Journal: Macroeconomics, 2023, vol. 15, issue 3, 388-430

Abstract: We document considerable scope of heterogeneity within the unemployed, especially when they are divided along eligibility for and receipt of unemployment insurance (UI). We study the implications of this heterogeneity on UI's insurance-incentive trade-off using a heterogeneous-agent job search model capable of matching the wealth and income differences that distinguish UI recipients from nonrecipients. Insurance benefits are larger for UI recipients who are predominantly wealth poor. Meanwhile, incentive costs are nonmonotonic in wealth because the poorest individuals, who value employment, exhibit weak responses. Differential elasticities imply that accounting for the composition of recipients is material to the evaluation of UI's insurance-incentive trade-off.

JEL-codes: D91 E24 E32 J64 J65 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/mac.20200057

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