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The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?

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  • Marcus Hagedorn
  • Iourii Manovskii
  • Kurt Mitman

Abstract

We measure the aggregate effect of unemployment benefit duration on employment and the labor force. We exploit the variation induced by Congress' failure in December 2013 to reauthorize the unprecedented benefit extensions introduced during the Great Recession. Federal benefit extensions that ranged from 0 to 47 weeks across US states were abruptly cut to zero. In sharp contrast to their typical dynamics, labor force and employment growth accelerated sharply in states with larger cuts in benefit duration. These findings are consistent with the equilibrium search framework that assigns an important role to endogenous job creation.

Suggested Citation

  • Marcus Hagedorn & Iourii Manovskii & Kurt Mitman, 2025. "The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?," American Economic Journal: Macroeconomics, American Economic Association, vol. 17(4), pages 168-203, October.
    • Handle: RePEc:aea:aejmac:v:17:y:2025:i:4:p:168-203
    DOI: 10.1257/mac.20200239
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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