The Effects of Unemployment Benefits on Unemployment and Labor Force Participation: Evidence from 35 Years of Benefits Extensions

41 Pages Posted: 19 Aug 2015

See all articles by Andrew Figura

Andrew Figura

Board of Governors of the Federal Reserve System - Macroeconomic Analysis Section

Regis Barnichon

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: August 20, 2014

Abstract

This paper presents estimates of the effect of emergency and extended unemployment benefits (EEB) on the unemployment rate and the labor force participation rate using a data set containing information on individuals likely eligible and ineligible for EEB back to the late 1970s. To identify these estimates, we examine how exit rates from unemployment change across different points of the distribution of unemployment duration when EEB is and is not available, controlling for changes in labor demand and demographic characteristics. We find that EEB increased the unemployment rate by about one-third percentage point in the most recent recession but did not affect the participation rate. In previous recessions, the effect of EEB on the unemployment rate was even smaller.

Keywords: Unemployment benefits extensions, unemployment rate, labor force participation rate

JEL Classification: J6, E24

Suggested Citation

Figura, Andrew and Barnichon, Regis, The Effects of Unemployment Benefits on Unemployment and Labor Force Participation: Evidence from 35 Years of Benefits Extensions (August 20, 2014). FEDS Working Paper No. 2014-65, Available at SSRN: https://ssrn.com/abstract=2498039 or http://dx.doi.org/10.2139/ssrn.2498039

Andrew Figura (Contact Author)

Board of Governors of the Federal Reserve System - Macroeconomic Analysis Section ( email )

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Regis Barnichon

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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