The Long-Term Effects of Unemployment Insurance Extensions on Employment

10 Pages Posted: 10 Feb 2012

See all articles by Johannes F. Schmieder

Johannes F. Schmieder

Boston University - Department of Economics; IZA; National Bureau of Economic Research (NBER)

Till von Wachter

Columbia Business School - Economics Department; IZA Institute of Labor Economics

Stefan Bender

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Date Written: February 2012

Abstract

The majority of papers analyzing the employment effects of unemployment insurance (UI) benefit durations focuses on the duration of the first unemployment spell. In this paper, we make two contributions. First, we use a regression discontinuity design to analyze the long-term effects of extensions in UI durations. These estimates differ from standard estimates that they incorporate differences in UI benefit receipt and employment due to recurrent unemployment spells. Second, we derive a welfare formula of UI extensions that incorporates recurrent nonemployment spells. We find that accounting for nonemployment beyond the initial spell leads to a significant reduction in estimates of the nonemployment effect of UI extensions by about 25 percent. We show this effect is only partly explained by a mechanical effect due to finite follow-up durations, and mainly arises from a lower probability of days in nonemployment in months after end of the initial nonemployment spell.

Suggested Citation

Schmieder, Johannes F. and von Wachter, Till and Bender, Stefan, The Long-Term Effects of Unemployment Insurance Extensions on Employment (February 2012). NBER Working Paper No. w17814. Available at SSRN: https://ssrn.com/abstract=2002572

Johannes F. Schmieder

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

IZA ( email )

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Till Von Wachter

Columbia Business School - Economics Department ( email )

420 West 118th Street
New York, NY 10027
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Stefan Bender

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany
+49 911 179 3082 (Phone)
+49 911 179 3297 (Fax)

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