IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp12805.html
   My bibliography  Save this paper

Individual and Market-Level Effects of UI Policies: Evidence from Missouri

Author

Listed:
  • Karahan, Fatih

    (Federal Reserve Bank of New York)

  • Mitman, Kurt

    (Stockholm University)

  • Moore, Brendan

    (Federal Reserve Bank of New York)

Abstract

We develop a method to jointly measure the response of worker search effort (individual effect) and vacancy creation (market-level effect) to changes in the duration of unemployment insurance (UI) benefits. To implement this approach, we exploit an unexpected cut in UI durations in Missouri and provide quasi-experimental evidence on the effect of UI on the labor market. The data indicate that the cut in Missouri significantly increased job finding rates by both raising the search effort of unemployed workers and the availability of jobs. The latter accounts for at least a third and up to 100% of the total effect.

Suggested Citation

  • Karahan, Fatih & Mitman, Kurt & Moore, Brendan, 2019. "Individual and Market-Level Effects of UI Policies: Evidence from Missouri," IZA Discussion Papers 12805, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12805
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp12805.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Elsby, Michael W.L. & Hobijn, Bart & Şahin, Ayşegül, 2015. "On the importance of the participation margin for labor market fluctuations," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 64-82.
    2. Alessandro Gavazza & Simon Mongey & Giovanni L. Violante, 2018. "Aggregate Recruiting Intensity," American Economic Review, American Economic Association, vol. 108(8), pages 2088-2127, August.
    3. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    4. Marinescu, Ioana, 2017. "The general equilibrium impacts of unemployment insurance: Evidence from a large online job board," Journal of Public Economics, Elsevier, vol. 150(C), pages 14-29.
    5. Ay?egül ?ahin & Joseph Song & Giorgio Topa & Giovanni L. Violante, 2014. "Mismatch Unemployment," American Economic Review, American Economic Association, vol. 104(11), pages 3529-3564, November.
    6. Marcus Hagedorn & Iourii Manovskii & Kurt Mitman, 2015. "The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?," NBER Working Papers 20884, National Bureau of Economic Research, Inc.
    7. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    8. James Albrecht & Bruno Decreuse & Susan Vroman, 2023. "Directed Search With Phantom Vacancies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 837-869, May.
    9. Jesse Rothstein, 2011. "Unemployment Insurance and Job Search in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 143-213.
    10. Rafael Lalive & Camille Landais & Josef Zweimüller, 2015. "Market Externalities of Large Unemployment Insurance Extension Programs," American Economic Review, American Economic Association, vol. 105(12), pages 3564-3596, December.
    11. Henry S. Farber & Jesse Rothstein & Robert G. Valletta, 2015. "The Effect of Extended Unemployment Insurance Benefits: Evidence from the 2012-2013 Phase-Out," American Economic Review, American Economic Association, vol. 105(5), pages 171-176, May.
    12. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
    13. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
    14. Marcus Hagedorn & Fatih Karahan & Iourii Manovskii & Kurt Mitman, 2013. "Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects," NBER Working Papers 19499, National Bureau of Economic Research, Inc.
    15. Shigeru Fujita & Giuseppe Moscarini, 2017. "Recall and Unemployment," American Economic Review, American Economic Association, vol. 107(12), pages 3875-3916, December.
    16. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 325-353, July.
    17. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2013. "The Establishment-Level Behavior of Vacancies and Hiring," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 581-622.
    18. Andrew C. Johnston & Alexandre Mas, 2018. "Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2480-2522.
    19. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    20. Feldstein, Martin S, 1978. "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, American Economic Association, vol. 68(5), pages 834-846, December.
    21. 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.
    22. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    23. Fatih Karahan & Yusuf Mercan, 2019. "UI and DI: Macroeconomic Implications of Program Substitution," 2019 Meeting Papers 1076, Society for Economic Dynamics.
    24. Card, David & Levine, Phillip B., 2000. "Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 107-138, October.
    25. Mitman, Kurt & Rabinovich, Stanislav, 2015. "Optimal unemployment insurance in an equilibrium business-cycle model," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 99-118.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mitman, Kurt & Rabinovich, Stanislav, 2021. "Whether, when and how to extend unemployment benefits: Theory and application to COVID-19," Journal of Public Economics, Elsevier, vol. 200(C).
    2. Hochmuth, Brigitte & Kohlbrecher, Britta & Merkl, Christian & Gartner, Hermann, 2021. "Hartz IV and the decline of German unemployment: A macroeconomic evaluation," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    3. Kristle R. Cortes & Andrew Glover & Murat Tasci, 2022. "The Unintended Consequences of Employer Credit Check Bans for Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 104(5), pages 997-1009, December.
    4. Gustavo de Souza & Andre Luduvice, 2022. "Optimal Unemployment Insurance Requirements," Working Paper Series WP 2022-45, Federal Reserve Bank of Chicago.

    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. Fatih Karahan & Kurt Mitman & Brendan Moore, 2019. "Micro and Macro Effects of UI Policies: Evidence from Missouri," Staff Reports 905, Federal Reserve Bank of New York.
    2. Andrew C. Johnston & Alexandre Mas, 2018. "Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2480-2522.
    3. Gałecka-Burdziak, Ewa & Góra, Marek & Jessen, Jonas & Jessen, Robin & Kluve, Jochen, 2021. "The effects of shortening potential benefit duration: Evidence from regional cut-offs and a policy reform," Ruhr Economic Papers 911, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Aiwei Huang, 2021. "To What Extent do Labor Market Outcomes respond to UI Extensions?," Papers 2104.12387, arXiv.org.
    5. Patrick J. Conway, 2022. "Unemployment insurance programs and the choice to leave the labor force," Southern Economic Journal, John Wiley & Sons, vol. 88(4), pages 1373-1400, April.
    6. 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.
    7. Johannes F. Schmieder & Till von Wachter, 2016. "The Effects of Unemployment Insurance Benefits: New Evidence and Interpretation," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 547-581, October.
    8. Jessen, Jonas & Jessen, Robin & Galecka-Burdziak, Ewa & Góra, Marek & Kluve, Jochen, 2023. "The Micro and Macro Effects of Changes in the Potential Benefit Duration," IZA Discussion Papers 15978, Institute of Labor Economics (IZA).
    9. Pei, Yun & Xie, Zoe, 2021. "A quantitative theory of time-consistent unemployment insurance," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 848-870.
    10. 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.
    11. Marco Di Maggio & Amir Kermani, 2016. "The Importance of Unemployment Insurance as an Automatic Stabilizer," NBER Working Papers 22625, National Bureau of Economic Research, Inc.
    12. Serdar Birinci & Kurt Gerrard See, 2018. "How Should Unemployment Insurance vary over the Business Cycle?," 2018 Meeting Papers 69, Society for Economic Dynamics.
    13. Steven Dieterle & Otávio Bartalotti & Quentin Brummet, 2020. "Revisiting the Effects of Unemployment Insurance Extensions on Unemployment: A Measurement-Error-Corrected Regression Discontinuity Approach," American Economic Journal: Economic Policy, American Economic Association, vol. 12(2), pages 84-114, May.
    14. 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.
    15. Ammar Farooq & Adriana D. Kugler & Umberto Muratori, 2020. "Do Unemployment Insurance Benefits Improve Match and Employer Quality? Evidence from Recent U.S. Recessions," NBER Working Papers 27574, National Bureau of Economic Research, Inc.
    16. Kohlbrecher, Britta & Merkl, Christian, 2022. "Business cycle asymmetries and the labor market," Journal of Macroeconomics, Elsevier, vol. 73(C).
    17. Gomme, Paul & Lkhagvasuren, Damba, 2015. "Worker search effort as an amplification mechanism," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 106-122.
    18. Tom Krebs & Martin Scheffel, 2016. "Labor Market Institutions and the Cost of Recessions," CESifo Working Paper Series 6262, CESifo.
    19. Kory Kroft & Kavan Kucko & Etienne Lehmann & Johannes Schmieder, 2020. "Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 254-292, February.
    20. Alisdair McKay & Ricardo Reis, 2021. "Optimal Automatic Stabilizers [Consumption versus Expenditure]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(5), pages 2375-2406.

    More about this item

    Keywords

    unemployment; unemployment insurance; vacancies; search;
    All these keywords.

    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
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:iza:izadps:dp12805. 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: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    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.