Research Spotlight: Assessing Unemployment Insurance

Unemployment insurance (UI) programs assist unemployed workers but can also reduce their incentive to search for a new job. This trade-off has led to multiple studies about whether the benefits of UI programs outweigh the costs. Most microeconomic analyses of these programs have determined that these programs do benefit society. In contrast, many macroeconomic analyses disagree, noting that unemployment benefits often tend to reduce production, reduce private savings, and increase prices. Recent research by Richmond Fed economist Nicholas Trachter, along with Facundo Piguillem of the Einaudi Institute for Economics and Finance and Hernán Ruffo of Universidad Torcuato Di Tella, attempts to reconcile these views by incorporating sources of wealth inequality into their model.