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A quantitative analysis of unemployment benefit extensions

  • Nakajima, Makoto

Extensions of unemployment insurance (UI) benefits have been implemented in response to the Great Recession. This paper measures the effect of these extensions on the unemployment rate using a calibrated structural model featuring job search and consumption-saving decisions, skill depreciation, and UI eligibility. The ongoing UI benefit extensions are found to have raised the unemployment rate by 1.4 percentage points, which is about 30% of the observed increase since 2007. Moreover, the contribution of the UI benefit extensions to the elevated unemployment rate increased during 2009–2011; while the number of vacancies recovered, the successive extensions kept search intensity down.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 59 (2012)
Issue (Month): 7 ()
Pages: 686-702

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Handle: RePEc:eee:moneco:v:59:y:2012:i:7:p:686-702
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