Unemployment Insurance Generosity and Aggregate Employment

80 Pages Posted: 10 Jan 2017

See all articles by Arindrajit Dube

Arindrajit Dube

University of California, Berkeley - Institute for Research on Labor and Employment

Lucas Goodman

University of Maryland

Ethan Kaplan

Stockholm University - Institute for International Economic Studies (IIES)

Christopher Boone

Cornell University

Abstract

This paper examines the impact of unemployment insurance (UI) on aggregate employment by exploiting cross-state variation in the maximum benefit duration during the Great Recession. Comparing adjacent counties located in neighboring states, we find no statistically significant impact of increasing UI generosity on aggregate employment. Our point estimates are uniformly small in magnitude, and the most precise estimates rule out employment-to-population ratio reductions in excess of 0.5 percentage points from the UI extension. We show that a moderately sized fiscal multiplier can rationalize our findings with the small negative labor supply impact of UI typically found in the literature.

Keywords: unemployment insurance, labor supply, fiscal multiplier

JEL Classification: J65, E62, E32

Suggested Citation

Dube, Arindrajit and Goodman, Lucas and Kaplan, Ethan Daniel and Boone, Christopher, Unemployment Insurance Generosity and Aggregate Employment. IZA Discussion Paper No. 10439. Available at SSRN: https://ssrn.com/abstract=2895247

Arindrajit Dube

University of California, Berkeley - Institute for Research on Labor and Employment ( email )

2521 Channing Way #5555
Berkeley, CA 94720
United States
510-642-9951 (Phone)

HOME PAGE: http://www.irle.berkeley.edu/cwed/dube.html

Lucas Goodman

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Ethan Daniel Kaplan

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

Christopher Boone (Contact Author)

Cornell University ( email )

Ithaca, NY 14853
United States

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