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Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program

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  • David Card
  • Phillip B. Levine

Abstract

In 1996 a political trade-off in the New Jersey legislature led to a six-month program that provided up to 13 additional weeks of exhausted their regular benefit entitlement. We use this unique episode to provide new evidence on the effect of changes in the duration of unemployment insurance (UI) benefits on the behavior of UI claimants. Unlike most benefit extensions, the New Jersey Extended Benefit (NJEB) program arose during a period of stable economic conditions, allowing us to sidestep the important issue of endogenous policy adoption. We use aggregate state-level data and administrative records for individual UI claimants from before, during, and after the NJEB program to estimate its impact on unemployment spell lengths. Overall, we find that the NJEB program raised the fraction of UI claimants who exhausted their regular benefits by 1-3 percentage points. More importantly, however, we find that the short-term nature of the benefit extension substantially moderated its effect. For individuals who were receiving UI when the benefit extension was passed, we estimate that the rate of leaving UI fell by about 15 percent. Simulations suggest that if the program had run long enough to affect UI claimants from the first day of their spell, the fraction of recipients exhausting regular benefits would have risen by 7 percentage points, and the average recipient would have collected about one extra week or regular benefits.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6714.

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Date of creation: Aug 1998
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Publication status: published as Card, David and Phillip B. Levine. "Extended Benefits And The Duration Of UI Spells: Evidence From The New Jersey Extended Benefit Program," Journal of Public Economics, 2000, v78(1-2,Oct), 107-138.
Handle: RePEc:nbr:nberwo:6714

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  1. Anderson, Patricia M & Meyer, Bruce D, 1997. "Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(3), pages 913-37, August.
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  5. Card, David & Levine, Phillip B., 2000. "Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program," Journal of Public Economics, Elsevier, Elsevier, vol. 78(1-2), pages 107-138, October.
  6. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, Econometric Society, vol. 58(4), pages 757-82, July.
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  11. Machin, Stephen & Manning, Alan, 1999. "The causes and consequences of longterm unemployment in Europe," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 47, pages 3085-3139 Elsevier.
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  16. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, Elsevier, vol. 28(1), pages 85-101, April.
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  18. Cynthia K. Gustafson & Phillip B. Levine, 1998. "Less-Skilled Workers, Welfare Reform, and the Unemployment Insurance System," NBER Working Papers 6489, National Bureau of Economic Research, Inc.
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