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Unemployment Insurance and Job Search in the Great Recession

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  • Rothstein, Jesse

Abstract

Nearly two years after the official end of the "Great Recession," the labor marketremains historically weak. One candidate explanation is supply-side effects driven bydramatic expansions of Unemployment Insurance (UI) benefit durations, to as many as 99 weeks. This paper investigates the effect of these UI extensions on job search and reemployment. I use the longitudinal structure of the Current Population Survey toconstruct unemployment exit hazards that vary across states, over time, and betweenindividuals with differing unemployment durations. I then use these hazards to explore a variety of comparisons intended to distinguish the effects of UI extensions from other determinants of employment outcomes. The various specifications yield quite similar results. UI extensions had significantbut small negative effects on the probability that the eligible unemployed would exitunemployment, concentrated among the long-term unemployed. The estimates implythat UI benefit extensions raised the unemployment rate in early 2011 by only about 0.1–0.5 percentage points, much less than is implied by previous analyses, with at least half of this effect attributable to reduced labor force exit among the unemployed rather than to the changes in reemployment rates that are of greater policy concern.

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Bibliographic Info

Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt5611t356.

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Date of creation: 16 Oct 2011
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Handle: RePEc:cdl:indrel:qt5611t356

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Keywords: Business; Social and Behavioral Sciences; Unemployment Insurance; Great Recession;

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  1. Greg Kaplan & Sam Schulhofer-Wohl, 2010. "Interstate migration has fallen less than you think: consequences of hot deck imputation in the Current Population Survey," Working Papers 681, Federal Reserve Bank of Minneapolis.
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  13. 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.
  14. Chetty, Raj, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Scholarly Articles 9751256, Harvard University Department of Economics.
  15. Mark Duggan & Scott A. Imberman, 2009. "Why Are the Disability Rolls Skyrocketing? The Contribution of Population Characteristics, Economic Conditions, and Program Generosity," NBER Chapters, in: Health at Older Ages: The Causes and Consequences of Declining Disability among the Elderly, pages 337-379 National Bureau of Economic Research, Inc.
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