Unemployment dynamics and endogenous unemployment insurance extensions

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper investigates the impact of endogenous unemployment insurance (UI) extensions on the dynamics of unemployment and its duration structure in the US. Using a search and matching model with worker heterogeneity, I allow for the maximum UI duration to depend on unemployment and for UI benefits to depend on worker characteristics. UI extensions have a large effect on long-term unemployment during the Great Recession via job search responses and a moderate effect on total unemployment via job separations. Disregarding rational expectations about the timing of UI extensions implies an overestimation of the unemployment rate by over 2 percentage points.

Keywords: Business cycles; long-term unemployment; unemployment insurance; unemployment duration; rational expectations (search for similar items in EconPapers)
JEL-codes: E24 E32 J24 J64 J65 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2019-05-01
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://eprints.lse.ac.uk/100948/ Open access version. (application/pdf)

Related works:
Working Paper: Unemployment Dynamics and Endogenous Unemployment Insurance Extensions (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:100948

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