Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut

No 13331, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine how a 16-week cut in potential unemployment insurance (UI) duration in Missouri affected search behavior of UI recipients and the aggregate labor market. Using a regression discontinuity design (RDD), we estimate a marginal effect of maximum duration on UI and nonemployment spells of approximately 0.45 and 0.25 respectively. We use the RDD estimates to simulate the unemployment rate assuming no market-level externalities. The simulated response, which implies almost a one percentage point decline in the unemployment rate, closely approximates the estimated change in the unemployment rate following the benefit cut. This finding suggests that, even in a period of high unemployment, the labor market absorbed this influx of workers without crowding-out other jobseekers.

Keywords: unemployment; unemployment insurance; labor supply; benefits; employment (search for similar items in EconPapers)
JEL-codes: D91 J64 J65 (search for similar items in EconPapers)
Pages: 85 pages
Date: 2020-06
New Economics Papers: this item is included in nep-ias, nep-lab and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - pubished in: Journal of Political Economy, 2018, 126 (6), 2480-2522

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Related works:
Journal Article: Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut (2018)
Working Paper: Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut (2016)
Working Paper: Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut (2015)
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