Do Extended Unemployment Bene ts Lengthen Unemployment Spells? Evidence from Recent Cycles in the U.S. Labor Market
In response to the Great Recession and sustained labor market downturn, the availability of unemployment insurance (UI) benefits was extended to new historical highs in the United States, up to 99 weeks as of late 2009 into 2012. We exploit variation in the timing and size of UI benefit extensions across states to estimate the overall impact of these extensions on unemployment duration, comparing the experience with the prior extension of benefits (up to 72 weeks) during the much milder downturn in the early 2000s. Using monthly matched individual data from the U.S. Current Population Survey (CPS) for the periods 2000-2005 and 2007-2012, we estimate the effects of UI extensions on unemployment transitions and duration. We rely on individual variation in benefit availability based on the duration of unemployment spells and the length of UI benefits available in the state and month, conditional on state economic conditions and individual characteristics. We find a small but statistically significant reduction in the unemployment exit rate and a small increase in the expected duration of unemployment arising from both sets of UI extensions. The effect on exits and duration is primarily due to a reduction in exits from the labor force rather than a decrease in exits to employment (the job finding rate). The magnitude of the overall effect on exits and duration is similar across the two episodes of benefit extensions. Although the overall efect of UI extensions on exits from unemployment is small, it implies a substantial effect of extended benefits on the steady-state share of unemployment in the cross-section that is long-term.
|Date of creation:||Apr 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Firestone Library, Princeton, New Jersey 08544-2098|
Phone: 609 258-4041
Fax: 609 258-2907
Web page: http://www.irs.princeton.edu/
More information through EDIRC
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.:
- 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.
- David Card & Phillip B. Levine, 1998. "Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program," NBER Working Papers 6714, National Bureau of Economic Research, Inc.
- Poterba, James M & Summers, Lawrence H, 1995. "Unemployment Benefits and Labor Market Transitions: A Multinomial Logit Model with Errors in Classification," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 207-16, May.
When requesting a correction, please mention this item's handle: RePEc:pri:indrel:573. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bobray Bordelon)
If references are entirely missing, you can add them using this form.