Staff Reports
Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects
October  Number 646
JEL classification: E24, J63, J64, J65

Authors: Marcus Hagedorn, Fatih Karahan, Iourii Manovskii, and Kurt Mitman

We exploit a policy discontinuity at U.S. state borders to identify the effects of unemployment insurance policies on unemployment. Our estimates imply that most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility. In contrast to the existing recent literature that mainly focused on estimating the effects of benefit duration on job search and acceptance strategies of the unemployed—the micro effect—we focus on measuring the general equilibrium macro effect that operates primarily through the response of job creation to unemployment benefit extensions. We find that it is the latter effect that is very important quantitatively.

Available only in PDF pdf  52 pages / 2030 kb
Tools
E-mail Alerts