Aggregate Employment Effects of Unemployment Benefits During Deep Downturns: Evidence from the Expiration of the Federal Pandemic Unemployment Compensation

24 Pages Posted: 15 Feb 2021 Last revised: 17 Apr 2022

See all articles by Arindrajit Dube

Arindrajit Dube

University of Massachusetts Amherst

Date Written: February 2021

Abstract

The expiration of the temporary $600 boost to weekly UI benefits under the Federal Pandemic Unemployment Compensation (FPUC) led to a sharp, unprecedented, 98 percentage point reduction (on average) in the replacement rate during a time when employment was recovering during the Covid recession. Leveraging the considerable variation in this drop across states, I use a difference-in-differences event study design to estimate the macro employment effects. I find little impact of job gains from the benefit reduction, especially when I focus on groups (non-college graduates, and those from non-high-income households) that comprise of most UI recipients. The estimates rule out job gains implied by much of the micro UI duration elasticities from the existing literature.

Suggested Citation

Dube, Arindrajit, Aggregate Employment Effects of Unemployment Benefits During Deep Downturns: Evidence from the Expiration of the Federal Pandemic Unemployment Compensation (February 2021). NBER Working Paper No. w28470, Available at SSRN: https://ssrn.com/abstract=3785804

Arindrajit Dube (Contact Author)

University of Massachusetts Amherst ( email )

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