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The impact of the Federal Pandemic Unemployment Compensation on job search and vacancy creation

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  • Marinescu, Ioana
  • Skandalis, Daphné
  • Zhao, Daniel

Abstract

During the COVID-19 pandemic, the Federal Pandemic Unemployment Compensation (FPUC) increased US unemployment benefits by $600 a week. Theory predicts that FPUC should decrease job applications, while the effect on vacancy creation is ambiguous. We estimate the effect of FPUC on job applications and vacancy creation week by week, from March to July 2020, using granular data from the online jobs platform Glassdoor. We exploit variation in the proportional increase in benefits across local labor markets. To isolate the effect of FPUC, we flexibly allow for different trends in local labor markets differentially exposed to the COVID-19 crisis. We verify that trends in outcomes prior to the FPUC do not correlate with future increases in benefits, which supports our identification assumption. First, we find that a 10% increase in unemployment benefits caused a 3.6% decline in applications, but did not decrease vacancy creation; hence, FPUC increased labor market tightness (vacancies/applications). Second, we document that tightness was unusually depressed during the FPUC period. Altogether, our results imply that the positive effect of FPUC on tightness was likely welfare improving: FPUC decreased competition among applicants at a time when jobs were unusually scarce. Our results also help explain prior findings that FPUC did not decrease employment.

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  • Marinescu, Ioana & Skandalis, Daphné & Zhao, Daniel, 2021. "The impact of the Federal Pandemic Unemployment Compensation on job search and vacancy creation," Journal of Public Economics, Elsevier, vol. 200(C).
  • Handle: RePEc:eee:pubeco:v:200:y:2021:i:c:s0047272721001079
    DOI: 10.1016/j.jpubeco.2021.104471
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    2. Nicolas Petrosky-Nadeau & Robert G. Valletta, 2021. "UI Generosity and Job Acceptance: Effects of the 2020 CARES Act," Working Paper Series 2021-13, Federal Reserve Bank of San Francisco.
    3. Guido Matias Cortes & Eliza Forsythe, 2023. "Distributional impacts of the Covid-19 pandemic and the CARES Act," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(2), pages 325-349, June.
    4. Chatterji Pinka & Li Yue, 2023. "Recovery from the COVID-19 Recession: Uneven Effects among Young Workers?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 23(3), pages 821-842, July.
    5. Giulia Giupponi & Camille Landais & Alice Lapeyre, 2022. "Should We Insure Workers or Jobs during Recessions?," Journal of Economic Perspectives, American Economic Association, vol. 36(2), pages 29-54, Spring.
    6. Faberman, R. Jason & Mueller, Andreas I. & Şahin, Ayşegül, 2022. "Has the Willingness to Work Fallen during the Covid Pandemic?," Labour Economics, Elsevier, vol. 79(C).
    7. Dengler, Thomas & Gehrke, Britta, 2021. "Short-Time Work and Precautionary Savings," IZA Discussion Papers 14329, Institute of Labor Economics (IZA).
    8. Blanas, Sotiris & Oikonomou, Rigas, 2023. "COVID-induced economic uncertainty, tasks and occupational demand," Labour Economics, Elsevier, vol. 81(C).
    9. Andreas Hornstein & Marios Karabarbounis & Andre Kurmann & Etienne Lale & Lien Ta, 2023. "Disincentive Effects of Unemployment Insurance Benefits," Working Paper 23-11, Federal Reserve Bank of Richmond.
    10. Larrimore, Jeff & Mortenson, Jacob & Splinter, David, 2023. "Earnings business cycles: The Covid recession, recovery, and policy response," Journal of Public Economics, Elsevier, vol. 225(C).
    11. Łukasz Arendt & Eugeniusz Kwiatkowski, 2023. "Kontrowersje wokół wpływu nowoczesnych technologii na zatrudnienie i bezrobocie," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 2, pages 195-216.
    12. Francesco Spadafora, 2022. "Don’t let me down: unemployment insurance in the United States," Questioni di Economia e Finanza (Occasional Papers) 673, Bank of Italy, Economic Research and International Relations Area.
    13. Daniel Goller & Stefan C. Wolter, 2021. "“Too shocked to search” The COVID-19 shutdowns’ impact on the search for apprenticeships," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 157(1), pages 1-15, December.
    14. Carrillo-Tudela, Carlos & Clymo, Alex & Comunello, Camila & Jäckle, Annette & Visschers, Ludo & Zentler-Munro, David, 2023. "Search and reallocation in the COVID-19 pandemic: Evidence from the UK," Labour Economics, Elsevier, vol. 81(C).
    15. Joe Piacentini & Harley Frazis & Peter B. Meyer & Michael Schultz & Leo Sveikauskas, 2022. "The Impact of COVID-19 on Labor Markets and Inequality," Economic Working Papers 551, Bureau of Labor Statistics.
    16. Park, Sungbin & Lee, Kyung Min & Earle, John S., 2024. "Death Without Benefits: Unemployment Insurance, Re-Employment, and the Spread of Covid," SocArXiv 2fnkp, Center for Open Science.
    17. Nurgun Kul Parlak & Ayse Nur Ciftci, 2022. "Pandeminin Kayit Disi Istihdami Dislama Etkisi: Turkiye’de Formel-Enformel Emek Piyasalarindaki Ayrisma," Journal of Social Policy Conferences, Istanbul University, Faculty of Economics, vol. 0(82), pages 93-135, June.
    18. Bennett, Fidel & Escudero, Verónica & Liepmann, Hannah & Podjanin, Ana, 2022. "Using Online Vacancy and Job Applicants' Data to Study Skills Dynamics," VfS Annual Conference 2022 (Basel): Big Data in Economics 264023, Verein für Socialpolitik / German Economic Association.
    19. Zarifhonarvar, Ali, 2022. "A Survey on the Impact of Covid-19 on the Labor Market," EconStor Preprints 265549, ZBW - Leibniz Information Centre for Economics.
    20. Christina D. Romer & David H. Romer, 2022. "A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay," Journal of Economic Perspectives, American Economic Association, vol. 36(2), pages 3-28, Spring.
    21. Ali Zarifhonarvar, 2023. "A Survey on the Impact of Covid-19 on the Labor Market," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 9(1), pages 1-10, 03-2023.
    22. Callaci, Brian & Gibson, Matthew & Pinto, Sergio & Steinbaum, Marshall & Walsh, Matt, 2023. "The Effect of Franchise No-Poaching Restrictions on Worker Earnings," IZA Discussion Papers 16330, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Unemployment insurance; Job vacancies; Job applications; COVID-19;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • 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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