COBOLing Together UI Benefits: How Delays in Fiscal Stabilizers Affect Aggregate Consumption *
51 Pages Posted: 24 Sep 2021 Last revised: 22 Dec 2023
Date Written: December 14, 2023
Abstract
The United States experienced an unprecedented increase in unemployment insurance (UI) claims starting in March 2020. State UI-benefit systems were inadequately prepared to process these claims. In states that used an antiquated programming language, COBOL, to process claims, potential claimants experienced a larger increase in administrative difficulties, which led to longer delays in benefit disbursement. Using daily debit and credit card consumption data from Affinity Solutions, I employ a two-way fixed-effects estimator to measure the causal impact of having an antiquated UI benefit system on aggregate consumption. Such systems led to a 2.8-percentage-point decline in total credit and debit card consumption relative to card consumption in states with more modern systems. I estimate that the share of claims whose processing was delayed by over 70 days rose by at least 2.1 percentage points more in COBOL states relative to non-COBOL states. Based on a back-of-the-envelope calculation using 2019 data, my results suggest that the decline in consumption in COBOL states in 2020 after the pandemic-emergency declaration corresponds to a real-GDP decline of at least $105 billion (in 2019 dollars).
Keywords: I38 unemployment insurance, administrative burdens, automatic stabilizers, emergency unemployment benefits, consumption
JEL Classification: E24, J65, E21, I38
Suggested Citation: Suggested Citation
Navarrete, Michael, COBOLing Together UI Benefits: How Delays in Fiscal Stabilizers Affect Aggregate Consumption * (December 14, 2023). Available at SSRN: https://ssrn.com/abstract=3928948 or http://dx.doi.org/10.2139/ssrn.3928948
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