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A quantitative analysis of unemployment benefit extensions

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  • Nakajima, Makoto

Abstract

Extensions of unemployment insurance (UI) benefits have been implemented in response to the Great Recession. This paper measures the effect of these extensions on the unemployment rate using a calibrated structural model featuring job search and consumption-saving decisions, skill depreciation, and UI eligibility. The ongoing UI benefit extensions are found to have raised the unemployment rate by 1.4 percentage points, which is about 30% of the observed increase since 2007. Moreover, the contribution of the UI benefit extensions to the elevated unemployment rate increased during 2009–2011; while the number of vacancies recovered, the successive extensions kept search intensity down.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 59 (2012)
Issue (Month): 7 ()
Pages: 686-702

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Handle: RePEc:eee:moneco:v:59:y:2012:i:7:p:686-702

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Web page: http://www.elsevier.com/locate/inca/505566

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The impact of the extension of unemployment insurance benefits in the US
    by Economic Logician in Economic Logic on 2011-04-01 14:03:00
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Cited by:
  1. Taskin, Temel, 2012. "Does unemployment insurance crowd out home production?," MPRA Paper 37583, University Library of Munich, Germany.
  2. Mukoyama, Toshihiko, 2013. "Understanding the welfare effects of unemployment insurance policy in general equilibrium," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 347-368.
  3. Michael W.L. Elsby & Bart Hobijn & Aysegül Sahin & Robert G. Valletta, 2011. "The labor market in the Great Recession: an update," Working Paper Series 2011-29, Federal Reserve Bank of San Francisco.
  4. David R. Howell & Bert M. Azizoglu, 2011. "Unemployment Benefits and Work Incentives: The U.S. Labor Market in the Great Recession (revised)," Working Papers wp257_revised, Political Economy Research Institute, University of Massachusetts at Amherst.
  5. Bart Hobijn & Aysegül Sahin, 2012. "Beveridge curve shifts across countries since the Great Recession," Working Paper Series 2012-24, Federal Reserve Bank of San Francisco.
  6. Nie, Jun & Fang, Lei, 2014. "Human capital dynamics and the U.S. labor market," Research Working Paper RWP 13-10, Federal Reserve Bank of Kansas City.
  7. David Fuller & Stephane Auray & Damba Lkhagvasuren, 2013. "Unemployment Insurance Take-up Rates in an Equilibrium Search Model," Working Papers 13001, Concordia University, Department of Economics.
  8. Krause, Michael U. & Uhlig, Harald, 2011. "Transitions in the German labor market: Structure and crisis," Discussion Paper Series 1: Economic Studies 2011,34, Deutsche Bundesbank, Research Centre.
  9. David R. Howell & Bert M. Azizoglu, 2011. "Unemployment benefits and work incentives: the US labour market in the Great Recession," Oxford Review of Economic Policy, Oxford University Press, vol. 27(2), pages 221-240.
  10. Stanislav Rabinovich & Kurt Mitman, 2011. "Pro-cyclical Unemployment Benefits? Optimal Policy in an Equilibrium Business Cycle Model," 2011 Meeting Papers 1247, Society for Economic Dynamics.
  11. Pollak, Andreas, 2013. "Employment Insurance and the Business Cycle," MPRA Paper 49358, University Library of Munich, Germany.
  12. Michael W.L. Elsby & Bart Hobijn & Aysegül Sahin, 2013. "On the importance of the participation margin for market fluctuations," Working Paper Series 2013-05, Federal Reserve Bank of San Francisco.

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