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Optimal Unemployment Insurance Requirements

Author

Listed:
  • Gustavo de Souza
  • André Victor D. Luduvice

Abstract

In the United States, workers must satisfy two requirements to receive unemployment insurance (UI): a tenure requirement of a minimum work spell and a monetary requirement of past minimum earnings. Using discontinuity of UI rules at state borders, we find that both requirements reduce unemployment and that the monetary requirement decreases the number of employers and the share of part‐time workers, while the tenure requirement has the opposite effect. We develop a heterogeneous agents model with history‐dependent UI benefits to explain these results and quantify an optimal utilitarian UI design. The optimal policy has a high monetary and a short tenure requirement.

Suggested Citation

  • Gustavo de Souza & André Victor D. Luduvice, 2026. "Optimal Unemployment Insurance Requirements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 67(2), pages 433-449, May.
    • Handle: RePEc:wly:iecrev:v:67:y:2026:i:2:p:433-449
    DOI: 10.1111/iere.70061
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    Cited by:

    1. is not listed on IDEAS
    2. Griffy, Benjamin & Rabinovich, Stanislav, 2023. "Worker selectivity and fiscal externalities from unemployment insurance," European Economic Review, Elsevier, vol. 156(C).
    3. Griffy, Benjamin & Masters, Adrian & You, Kai, 2025. "Unemployment insurance and job polarization," Labour Economics, Elsevier, vol. 93(C).

    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
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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