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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. Jennifer Hunt, 1992. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Discussion Papers of DIW Berlin 50, DIW Berlin, German Institute for Economic Research.
  2. Stephen Machin & Alan Manning, 1998. "The Causes and Consequences of Long-Term Unemployment in Europe," CEP Discussion Papers dp0400, Centre for Economic Performance, LSE.
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  4. Moffitt, Robert & Nicholson, Walter, 1982. "The Effect of Unemployment Insurance on Unemployment: The Case of Federal Supplemental Benefits," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 1-11, February.
  5. David Card & Phillip B. Levine, 1998. "Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program," NBER Working Papers 6714, National Bureau of Economic Research, Inc.
  6. Winter-Ebmer, Rudolf, 1996. "Potential Unemployment Benefit Duration and Spell Length: Lessons from a Quasi-experiment in Austria," CEPR Discussion Papers 1534, C.E.P.R. Discussion Papers.
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  10. McCall, Brian P, 1995. "The Impact of Unemployment Insurance Benefit Levels on Recipiency," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 13(2), pages 189-98, April.
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  15. Stephen A. Woodbury & Murray Rubin, 1997. "The Duration of Benefits," Book chapters authored by Upjohn Institute researchers, W.E. Upjohn Institute for Employment Research, in: Christopher J. O'Leary & Stephen A. Wandner (ed.), Unemployment Insurance in the United States: Analysis of Policy Issues, chapter 6, pages 211-283 W.E. Upjohn Institute for Employment Research.
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