Effects of Extended Unemployment Insurance Benefits: Evidence From The Monthly CPS

28 Pages Posted: 26 Nov 2010

See all articles by Shigeru Fujita

Shigeru Fujita

Federal Reserve Bank of Philadelphia

Date Written: November 1, 2010

Abstract

Using the monthly CPS, the author estimates unemployment-to-employment (UE) transition rates and unemployment-to-inactivity (UN) transition rates by unemployment duration for male workers. When estimated for the period of 2004-2007, during which no extended benefits are available, both of the transition-rate profiles show clear patterns consistent with the expiration of regular benefits at 26 weeks. These patterns largely disappear in the profiles for the period of 2009-2010, during which large-scale extensions have become available. The author conducts counterfactual experiments in which the estimated profiles for 2009-2010 are replaced by the hypothetical profiles inferred from the ones for 2004-2007. The results indicate that the benefit extensions in recent years have raised male workers' unemployment rate by 0.9-1.7 percentage points. Roughly 50-60 percent of the total increase is attributed to the effects on UE transition rates and the remaining part is accounted for by the effects on UN transition rates.

Keywords: Unemployment Duration, Unemployment Insurance, CPS

JEL Classification: J08, J64, J65

Suggested Citation

Fujita, Shigeru, Effects of Extended Unemployment Insurance Benefits: Evidence From The Monthly CPS (November 1, 2010). FRB of Philadelphia Working Paper No. 10-35, Available at SSRN: https://ssrn.com/abstract=1713806 or http://dx.doi.org/10.2139/ssrn.1713806

Shigeru Fujita (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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