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Unemployment Insurance Benefit Levels and Consumption Changes

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Author Info
Martin Browning
Thomas Crossley

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Abstract

We use a survey of unemployed people to examine how a job loss impacts on household expenditures. The principle focus is on the effect of the level of income replacement provided by Unemployment Insurance. We restrict attention to a sub-sample of respondents who are still in their first spell of unemployment after six months. For this group we find large consumption falls, averaging about 16% of total expenditure. The actual fall depends on a variety of factors of which the most important is the pre-job loss ratio of the respondent's income to hosuehold income. The effects of varying the replacement ratio are relatively small. We only find effects for those who did not have assets at the job loss and even for them the elasticity of total expenditure with respect to benefit is msall. We conclude that for most of our sample, small changes in the benefit level will have no effect on living standards within the household and hence on other facets of behavious such as job search, unemployment duration and the quality of any new job taken.

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Paper provided by McMaster University in its series Department of Economics Working Papers with number 1996-01.

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Length: 38 pages
Date of creation: Jan 1996
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Handle: RePEc:mcm:deptwp:1996-01

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  1. Martin Browning & Annamaria Lusardi, 1995. "Household Saving: Micro Theories and Micro Facts," Department of Economics Working Papers 1995-02, McMaster University. [Downloadable!]
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  2. Baker, Michael & Benjamin, Dwayne, 1997. "The Role of the Family in Immigrants' Labor-Market Activity: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 87(4), pages 705-27, September. [Downloadable!] (restricted)
  3. John P. Haisken-DeNew & Christoph M. Schmidt, . "Inter-Industry and Inter-Region Differentials: Mechanics and Interpretation," Working Papers 9504, SELAPO Center for Human Resources. [Downloadable!]
  4. David Card & Abigail A. Payne, 1997. "School Finance Reform, the Distribution of School Spending, and the Distribution of SAT Scores," Working Papers 766, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  5. Gregory, R.G. & Daly, A.E., 1990. "Can Economic Theory Explain Why Australian Women Are So Well Paid Relative To Their U.S. Counterparts?," CEPR Discussion Papers 226, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University.
  6. Antecol, Heather & Kuhn, Peter, 2000. "Gender as an Impediment to Labor Market Success: Why Do Young Women Report Greater Harm?," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 702-28, October. [Downloadable!] (restricted)
  7. Carroll, Christopher D & Rhee, Byung-Kun & Rhee, Changyong, 1994. "Are There Cultural Effects on Saving? Some Cross-Sectional Evidence," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 685-99, August. [Downloadable!] (restricted)
  8. Blau, Francine D & Kahn, Lawrence M, 1996. "Wage Structure and Gender Earnings Differentials: An International Comparison," Economica, London School of Economics and Political Science, vol. 63(250), pages S29-62, Suppl.. [Downloadable!] (restricted)
  9. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March. [Downloadable!] (restricted)
  10. Michael P. Kidd & Michael Shannon, 1996. "The gender wage gap: A comparison of Australia and Canada," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 49(4), pages 729-746, July.
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  11. Amemiya, Takeshi, 1978. "A Note on a Random Coefficients Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(3), pages 793-96, October. [Downloadable!] (restricted)
  12. Christopher D Carroll, 1990. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," Economics Working Paper Archive 371, The Johns Hopkins University,Department of Economics, revised Aug 1996.
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  13. Lundberg, Shelly, 1985. "The Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 11-37, January. [Downloadable!] (restricted)
  14. Long, James E, 1980. "The Effect of Americanization on Earnings: Some Evidence for Women," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 620-29, June. [Downloadable!] (restricted)
  15. Borjas, George J. & Sueyoshi, Glenn T., 1994. "A two-stage estimator for probit models with structural group effects," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 165-182. [Downloadable!] (restricted)
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  16. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier. [Downloadable!] (restricted)
  17. repec:fth:prinin:387 is not listed on IDEAS
  18. Kell, Michael & Wright, Jane, 1990. "Benefits and the Labour Supply of Women Married to Unemployed Men," Economic Journal, Royal Economic Society, vol. 100(400), pages 119-26, Supplemen. [Downloadable!] (restricted)
  19. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-53, September. [Downloadable!] (restricted)
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