Unemployment Insurance Monthly Benefits, Pay Frequency, and Claimants' Job Search Behavior

Abstract

This paper studies how the unemployment insurance (UI) benefit profile and payment schedule impact claimants' behaviors. The study reveals that liquidity-unconstrained claimants are less likely to exit UI in months following a high likelihood of an extra benefit check. Additionally, there is suggestive evidence that these claimants are less likely to exit UI when their benefit profiles begin with a high probability of extra benefits. Moreover, leveraging state-level policy variation in the benefit pay schedule, the paper documents that switching from a biweekly to a (smoother) weekly pay schedule induces claimants to have higher reservation wages and lower exiting hazard. This paper provides novel evidence that the timing and the monthly profiles of benefit payments are important to consider when designing social insurance policies.

Keywords: unemployment insurance, Benefit Profile, Pay Frequency, job search