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How much of the decline in unemployment is due to the exhaustion of unemployment benefits?

Author

Listed:
  • Luojia Hu
  • Shani Schechter

Abstract

Prior studies have examined the impact of extended unemployment insurance (UI) benefits on the rise in the unemployment rate in this recession and early recovery. We use real-time microdata from the Bureau of Labor Statistics’ Current Population Survey (CPS) to examine whether there has been a reverse effect recently as benefits have been exhausted. We find that if UI benefits had lasted indefinitely, the unemployment rate would have been cumulatively about 0.1 to 0.3 percentage points higher between October 2009 and January 2011, which represents about 10% to 25% of the decline in the actual rate over that period.

Suggested Citation

  • Luojia Hu & Shani Schechter, 2011. "How much of the decline in unemployment is due to the exhaustion of unemployment benefits?," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue July.
  • Handle: RePEc:fip:fedhle:y:2011:i:july:n:288
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    File URL: http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2011/cfljuly2011_288.pdf
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    Cited by:

    1. Gadi Barlevy, 2011. "Evaluating the role of labor market mismatch in rising unemployment," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 82-96.

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    Keywords

    Unemployment;

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