IDEAS home Printed from https://ideas.repec.org/a/wly/jpamgt/v43y2024i2p530-554.html
   My bibliography  Save this article

Unemployment Insurance benefit reduction and food hardship

Author

Listed:
  • Chandra Dhakal
  • Yufeng Luo
  • Shaonan Wang
  • Chen Zhen

Abstract

We leverage the sharp drop in unemployment insurance (UI) benefits following the expiration of the Federal Pandemic Unemployment Compensation program to estimate the consumption smoothing effect of UI. The $600/week decline in supplemental UI benefits is estimated to reduce total food spending by 9.7% and the odds of having food sufficiency by 6.0%. The estimate for food spending translates to a marginal propensity to spend on food out of UI benefits of 0.06, or a 1.2% reduction in food spending for every 10 percentage point decline in UI replacement rate (calculated as the ratio of UI benefits to pre‐unemployment wages). We find that the consumption effect of UI is countercyclical, greater when economic conditions are weak. The UI effect is also heterogeneous over respondents differentiated by race and ethnicity, income, homeownership, presence of children, state unemployment rates, and state UI generosity. The estimated effect of UI on self‐assessed food sufficiency and confidence about future food sufficiency is largely consistent with the food spending results.

Suggested Citation

  • Chandra Dhakal & Yufeng Luo & Shaonan Wang & Chen Zhen, 2024. "Unemployment Insurance benefit reduction and food hardship," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 43(2), pages 530-554, March.
  • Handle: RePEc:wly:jpamgt:v:43:y:2024:i:2:p:530-554
    DOI: 10.1002/pam.22531
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/pam.22531
    Download Restriction: no

    File URL: https://libkey.io/10.1002/pam.22531?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Elira Kuka, 2020. "Quantifying the Benefits of Social Insurance: Unemployment Insurance and Health," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 490-505, July.
    2. Kory Kroft & Matthew J. Notowidigdo, 2016. "Should Unemployment Insurance Vary with the Unemployment Rate? Theory and Evidence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(3), pages 1092-1124.
    3. Brenna Ellison & Brandon McFadden & Bradley J. Rickard & Norbert L. W. Wilson, 2021. "Examining Food Purchase Behavior and Food Values During the COVID‐19 Pandemic," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(1), pages 58-72, March.
    4. Christian A. Gregory & Travis A. Smith, 2019. "Salience, Food Security, and SNAP Receipt," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 38(1), pages 124-154, January.
    5. Sarah Miller & Norman Johnson & Laura R Wherry, 2021. "Medicaid and Mortality: New Evidence From Linked Survey and Administrative Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(3), pages 1783-1829.
    6. Timothy K.M. Beatty & Charlotte J. Tuttle, 2015. "Expenditure Response to Increases in In-Kind Transfers: Evidence from the Supplemental Nutrition Assistance Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(2), pages 390-404.
    7. Youssef Benzarti & Dorian Carloni, 2019. "Who Really Benefits from Consumption Tax Cuts? Evidence from a Large VAT Reform in France," American Economic Journal: Economic Policy, American Economic Association, vol. 11(1), pages 38-63, February.
    8. East, Chloe N. & Kuka, Elira, 2015. "Reexamining the consumption smoothing benefits of Unemployment Insurance," Journal of Public Economics, Elsevier, vol. 132(C), pages 32-50.
    9. Bhattacharya, Jayanta & Currie, Janet & Haider, Steven, 2004. "Poverty, food insecurity, and nutritional outcomes in children and adults," Journal of Health Economics, Elsevier, vol. 23(4), pages 839-862, July.
    10. Peter Ganong & Fiona Greig & Max Liebeskind & Pascal Noel & Daniel Sullivan & Joseph Vavra, 2021. "Spending and Job Search Impacts of Expanded Unemployment Benefits: Evidence from Administrative Micro Data," Working Papers 2021-19, Becker Friedman Institute for Research In Economics.
    11. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    12. Browning, Martin & Crossley, Thomas F., 2001. "Unemployment insurance benefit levels and consumption changes," Journal of Public Economics, Elsevier, vol. 80(1), pages 1-23, April.
    13. Alaimo, K. & Olson, C.M. & Frongillo E.A., Jr. & Briefel, R.R., 2001. "Food insufficiency, family income, and health in US preschool and school-aged children," American Journal of Public Health, American Public Health Association, vol. 91(5), pages 781-786.
    14. Craig Gundersen & David Ribar, 2011. "Food Insecurity And Insufficiency At Low Levels Of Food Expenditures," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(4), pages 704-726, December.
    15. Raj Chetty & Adam Szeidl, 2007. "Consumption Commitments and Risk Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 831-877.
    16. Marc F. Bellemare & Casey J. Wichman, 2020. "Elasticities and the Inverse Hyperbolic Sine Transformation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(1), pages 50-61, February.
    17. Brandon J. Restrepo & Matthew P. Rabbitt & Christian A. Gregory, 2021. "The Effect of Unemployment on Food Spending and Adequacy: Evidence from Coronavirus‐Induced Firm Closures," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(1), pages 185-204, March.
    18. Ganong, Peter & Noel, Pascal & Vavra, Joseph, 2020. "US unemployment insurance replacement rates during the pandemic," Journal of Public Economics, Elsevier, vol. 191(C).
    19. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
    20. Nord, Mark & Brent, C. Philip, 2002. "Food Insecurity in Higher Income Households," Miscellaneous Publications 344960, United States Department of Agriculture, Economic Research Service.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter Ganong & Pascal Noel, 2019. "Consumer Spending during Unemployment: Positive and Normative Implications," American Economic Review, American Economic Association, vol. 109(7), pages 2383-2424, July.
    2. Gregory E. Givens, 2022. "Unemployment, Partial Insurance, And The Multiplier Effects Of Government Spending," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 571-599, May.
    3. Zhang, Guangli, 2021. "The Effect of Unemployment Benefit Pay Frequency on UI Claimants' Job Search Behaviors," Working Papers 21-3, Sinquefield Center for Applied Economic Research, Saint Louis University.
    4. Elira Kuka, 2020. "Quantifying the Benefits of Social Insurance: Unemployment Insurance and Health," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 490-505, July.
    5. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
    6. Pattison, Nathaniel, 2020. "Consumption smoothing and debtor protections," Journal of Public Economics, Elsevier, vol. 192(C).
    7. Liepmann, Hannah & Pignatti, Clemente, 2024. "Welfare effects of unemployment benefits when informality is high," Journal of Public Economics, Elsevier, vol. 229(C).
    8. Jason M. Lindo & Krishna Regmi & Isaac Swensen, 2020. "Stable Income, Stable Family," NBER Working Papers 27753, National Bureau of Economic Research, Inc.
    9. Edwards Kathryn Anne, 2020. "Who helps the unemployed? Workers’ receipt of public and private transfers," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-26, March.
    10. Camille Landais & Pascal Michaillat & Emmanuel Saez, 2018. "A Macroeconomic Approach to Optimal Unemployment Insurance: Applications," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 182-216, May.
    11. Paciorek, Andrew & Sinai, Todd, 2012. "Does home owning smooth the variability of future housing consumption?," Journal of Urban Economics, Elsevier, vol. 71(2), pages 244-257.
    12. Robert A. Moffitt, 2014. "Unemployment benefits and unemployment," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-13, May.
    13. Yavuz Arslan & Ahmet Degerli & Gazi Kabas, 2019. "Unintended Consequences of Unemployment Insurance Benefits: The Role of Banks," Swiss Finance Institute Research Paper Series 19-44, Swiss Finance Institute.
    14. Elira Kuka & Bryan A. Stuart, 2021. "Racial Inequality in Unemployment Insurance Receipt and Take-Up," NBER Working Papers 29595, National Bureau of Economic Research, Inc.
    15. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    16. Jim Been & Eduard Suari‐Andreu & Marike Knoef & Rob Alessie, 2024. "Consumption and time use responses to unemployment: Implications for the lifecycle model," Economica, London School of Economics and Political Science, vol. 91(361), pages 1-32, January.
    17. Been, J.; & Suari-Andreu, E.; & Knoef, M.;, 2022. "The short-run effects of unexpected job loss on health," Health, Econometrics and Data Group (HEDG) Working Papers 22/21, HEDG, c/o Department of Economics, University of York.
    18. Serdar Birinci & Kurt Gerrard See, 2018. "How Should Unemployment Insurance vary over the Business Cycle?," 2018 Meeting Papers 69, Society for Economic Dynamics.
    19. Nathaniel Pattison, 2024. "Landlords as Lenders of Last Resort? Late Housing Payments During Unemployment," Departmental Working Papers 2401, Southern Methodist University, Department of Economics.
    20. Gelman, Michael & Kariv, Shachar & Shapiro, Matthew D. & Silverman, Dan & Tadelis, Steven, 2020. "How individuals respond to a liquidity shock: Evidence from the 2013 government shutdown," Journal of Public Economics, Elsevier, vol. 189(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jpamgt:v:43:y:2024:i:2:p:530-554. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/journal/34787/home .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.