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How Income Changes During Unemployment: Evidence from Tax Return Data

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Abstract

We use a panel of tax returns spanning 1999 to 2011 to provide new evidence on household experiences during unemployment. Unemployment is associated with roughly a 20% reduction in household wage earnings. Unemployment insurance compensates for half of these wage losses. Households also partially compensate by using a variety of income sources. Distributions from retirement accounts increase in the short run. Self-employment income and disability insurance payments increase over longer periods. More generous UI benefits crowd out wage income and are associated with increased distributions from retirement accounts. This combination of responses is consistent with UI benefits lengthening unemployment spells.

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  • Sara LaLumia & Laura Kawano, 2013. "How Income Changes During Unemployment: Evidence from Tax Return Data," Department of Economics Working Papers 2013-05, Department of Economics, Williams College, revised Mar 2015.
    • Handle: RePEc:wil:wileco:2013-05
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    Cited by:

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    3. Javier Gardeazabal & Eduardo Polo-Muro, 2022. "Cultural expenditure of those who enter (or exit) unemployment," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 46(4), pages 571-596, December.
    4. Fagereng, Andreas & Onshuus, Helene & Torstensen, Kjersti N., 2024. "The consumption expenditure response to unemployment: Evidence from Norwegian households," Journal of Monetary Economics, Elsevier, vol. 146(C).
    5. Aaron Albert, 2018. "Parental duties, labor market behavior, and single fatherhood in America," Review of Economics of the Household, Springer, vol. 16(4), pages 1063-1083, December.

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