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Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program

  • David Card
  • Phillip B. Levine

In 1996 a political trade-off in the New Jersey legislature led to a six-month program that provided up to 13 additional weeks of exhausted their regular benefit entitlement. We use this unique episode to provide new evidence on the effect of changes in the duration of unemployment insurance (UI) benefits on the behavior of UI claimants. Unlike most benefit extensions, the New Jersey Extended Benefit (NJEB) program arose during a period of stable economic conditions, allowing us to sidestep the important issue of endogenous policy adoption. We use aggregate state-level data and administrative records for individual UI claimants from before, during, and after the NJEB program to estimate its impact on unemployment spell lengths. Overall, we find that the NJEB program raised the fraction of UI claimants who exhausted their regular benefits by 1-3 percentage points. More importantly, however, we find that the short-term nature of the benefit extension substantially moderated its effect. For individuals who were receiving UI when the benefit extension was passed, we estimate that the rate of leaving UI fell by about 15 percent. Simulations suggest that if the program had run long enough to affect UI claimants from the first day of their spell, the fraction of recipients exhausting regular benefits would have risen by 7 percentage points, and the average recipient would have collected about one extra week or regular benefits.

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File URL: http://www.nber.org/papers/w6714.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6714.

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Date of creation: Aug 1998
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Publication status: published as Card, David and Phillip B. Levine. "Extended Benefits And The Duration Of UI Spells: Evidence From The New Jersey Extended Benefit Program," Journal of Public Economics, 2000, v78(1-2,Oct), 107-138.
Handle: RePEc:nbr:nberwo:6714
Note: LS PE
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  1. Bruce D. Meyer & Dan T. Rosenbaum, . "Repeat Use of Unemployment Insurance," IPR working papers 95-24, Institute for Policy Resarch at Northwestern University.
  2. Saul J. Blaustein, 1993. "Unemployment Insurance in the United States: The First Half Century," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number uius, March.
  3. Rebecca M. Blank & David Card, 1989. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," NBER Working Papers 2871, National Bureau of Economic Research, Inc.
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  5. Lawrence Katz & Bruce Meyer, 1988. "The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment," Working Papers 621, Princeton University, Department of Economics, Industrial Relations Section..
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  8. Machin, Stephen & Manning, Alan, 1999. "The causes and consequences of longterm unemployment in Europe," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 47, pages 3085-3139 Elsevier.
  9. Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
  10. Anderson, Patricia M & Meyer, Bruce D, 1997. "Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 913-37, August.
  11. McCall, Brian P, 1995. "The Impact of Unemployment Insurance Benefit Levels on Recipiency," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 189-98, April.
  12. 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.
  13. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  14. McCall, B.P., 1993. "Unemployment Insurance Rules, Joblessness, and Part-Time Work," Papers 93-07, Minnesota - Industrial Relations Center.
  15. Jennifer Hunt, 1992. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Discussion Papers of DIW Berlin 50, DIW Berlin, German Institute for Economic Research.
  16. Dale Mortensen, 1984. "Job Search and Labor Market Analysis," Discussion Papers 594, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Stephen A. Woodbury & Murray Rubin, 1997. "The Duration of Benefits," Book chapters authored by Upjohn Institute researchers, in: Christopher J. O'Leary & Stephen A. Wandner (ed.), Unemployment Insurance in the United States: Analysis of Policy Issues, chapter 6, pages 211-283 W.E. Upjohn Institute for Employment Research.
  18. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
  19. Moffitt, Robert & Nicholson, Walter, 1982. "The Effect of Unemployment Insurance on Unemployment: The Case of Federal Supplemental Benefits," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 1-11, February.
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