Delayed Collection of Unemployment Insurance in Recessions
52 Pages Posted: 1 Jul 2019
Date Written: 2019-06-01
Using variations in unemployment insurance policies over time and across U.S. states, this paper provides evidence that allowing unemployed workers to delay the collection of benefits increases their job-finding rate. In a model with discrete job take-up decisions, benefit entitlement, wage-indexed benefits, and heterogeneous job types, I demonstrate that the policy can increase an unemployed worker's willingness to work, even though more benefits in general reduce the relative value of employment. In a calibrated quantitative model, I find that allowing delayed benefit collection increases the overall job finding rates and may lower the unemployment rate both in a steady state stationary economy and over a transition path during 2008--12.
Keywords: health, frailty index, life cycle profiles
JEL Classification: E24, J65
Suggested Citation: Suggested Citation