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Expanding Unemployment Insurance Coverage

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Abstract

This paper develops a quantitative framework to study the impact of Unemployment Insurance (UI) expansions to workers earning below eligibility thresholds. A model of how UI affects welfare and labor supply is developed and calibrated with microeconomic data, including consumption. The model predicts that the current ineligible would choose to stay on UI longer than the current eligible and the margins of why this is the case are quantified. The model is applied to the Great Recession by identifying ineligible workers in the data using machine learning and to an actual expansion during COVID-19 using administrative data. The UI duration for newly eligible under the expansion was 1.7 times longer than the previous eligible but is one-third shorter than the model's economic incentives predict. This suggests caution in extrapolating from the COVID-19 data and the model is used to predict impacts of smaller scale expansions during non-pandemic times.

Suggested Citation

  • Amanda M. Michaud, 2023. "Expanding Unemployment Insurance Coverage," Opportunity and Inclusive Growth Institute Working Papers 067, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmoi:95879
    DOI: 10.21034/iwp.67
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    References listed on IDEAS

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    Cited by:

    1. 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.

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    More about this item

    Keywords

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    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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