The Arra: Some Unpleasant Welfare Arithmetic

48 Pages Posted: 7 Dec 2012

See all articles by Casey B. Mulligan

Casey B. Mulligan

University of Chicago; National Bureau of Economic Research (NBER)

Date Written: December 2012

Abstract

Distributions of tax rates on job acceptance and layoff margins are estimated for unemployed household heads and spouses under three benefit and tax rule scenarios: actual rules under the American Reinvestment and Recovery Act, rules as they would have been if they had not been changed since 2007, and rules as they might have been with a bigger fiscal stimulus. Two or three million unemployed household heads and spouses, with a variety of tax situations, had as much disposable income while unemployed as they would have by accepting a job that paid 80-100 percent of their previous one. The number would have been less than one million under 2007 rules, and about nine million under a bigger stimulus. Tax obligations and foregone unemployment insurance about equally erode the rewards from retaining a job, or starting a new one.

Suggested Citation

Mulligan, Casey B., The Arra: Some Unpleasant Welfare Arithmetic (December 2012). NBER Working Paper No. w18591. Available at SSRN: https://ssrn.com/abstract=2186320

Casey B. Mulligan (Contact Author)

University of Chicago ( email )

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National Bureau of Economic Research (NBER)

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