Unemployment Benefits and Work Incentives: The U.S. Labor Market in the Great Recession
In the midst of massive job destruction and sharply rising long-term unemployment, a series of unemployment insurance (UI) eligibility extensions were enacted in 2008-09 that raised the regular 26-week limit to as many as 99 weeks. In response, many leading economists and business press editorials invoked the 'laws of economics' to warn that since extended benefits reduce work incentives, UI extensions would exacerbate the long-term unemployment problem. This paper reviews the evidence put forward in support of the orthodox prediction, which has relied on extrapolating from pre-Great Recession conditions, particularly through the application of "spike at benefit-exhaustion" findings from the early 1980s. Much more compelling evidence can be found by direct examination of the 2008-10 data, which shows no support for UI related work disincentive effects.
|Date of creation:||May 2011|
|Contact details of provider:|| Postal: 6 East 16th Street, New York, NY 10003|
Web page: http://www.economicpolicyresearch.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nakajima, Makoto, 2012.
"A quantitative analysis of unemployment benefit extensions,"
Journal of Monetary Economics,
Elsevier, vol. 59(7), pages 686-702.
- Makoto Nakajima, 2011. "A Quantitative Analysis of Unemployment Benefit Extensions," Global COE Hi-Stat Discussion Paper Series gd10-175, Institute of Economic Research, Hitotsubashi University.
- Makoto Nakajima, 2011. "Quantitative Analysis of Unemployment Benefit Extensions," 2011 Meeting Papers 328, Society for Economic Dynamics.
- Makoto Nakajima, 2011. "A quantitative analysis of unemployment benefit extensions," Working Papers 11-8, Federal Reserve Bank of Philadelphia.
- Michael W. L. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 1-69.
- Bart Hobijn & Aysegul Sahin & Michael Elsby, 2010. "The Labor Market in the Great Recession," 2010 Meeting Papers 323, Society for Economic Dynamics.
- Michael Elsby & Bart Hobijn & Aysegül Sahin, 2010. "The labor market in the Great Recession," Working Paper Series 2010-07, Federal Reserve Bank of San Francisco.
- Michael W. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," NBER Working Papers 15979, National Bureau of Economic Research, Inc.
- Schmieder, Johannes F. & Wachter, Till von & Bender, Stefan, 2010. "The effects of unemployment insurance on labor supply and search outcomes : regression discontinuity estimates from Germany," IAB Discussion Paper 201004, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
- Raj Chetty, 2008. "Moral Hazard vs. Liquidity and Optimal Unemployment Insurance," NBER Working Papers 13967, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)