COBOLing Together UI Benefits: How Delays in Fiscal Stabilizers Affect Aggregate Consumption

45 Pages Posted: 24 Sep 2021 Last revised: 22 Dec 2023

See all articles by Michael Navarrete

Michael Navarrete

University of Maryland - Department of Economics

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 and may have led to an increase in discouraged filers. 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 identify two factors that are likely to have contributed to this outcome: delays in benefit disbursement and an increase in discouraged filers. I estimate that the share of claims whose processing was delayed by over 70 days rose by 1.4 percentage points more in COBOL states relative to non-COBOL states. I also find suggestive evidence that the increase in administrative burden for claimants in COBOL states led to an additional 4.5 million discouraged filers relative to the number that would have been expected had they faced the same increase in administrative burden as claimants in 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 $90 billion (in 2012 dollars).

Keywords: unemployment insurance, administrative burdens, automatic stabilizers, emergency unemployment benefits, consumption

JEL Classification: E24, J65, E21, I38

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

Michael Navarrete (Contact Author)

University of Maryland - Department of Economics ( email )

United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
910
Abstract Views
14,244
Rank
49,265
PlumX Metrics