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Economic effects of the unemployment insurance benefit

Author

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  • Shigeru Fujita

Abstract

The U.S. labor market has remained weak in recent years, even though the overall economy itself has started to grow again after the deep recession. In response to the weak labor market conditions, the U.S. government has greatly expanded the entitlement period of unemployment insurance (UI) benefits. In ?Economic Effects of the Unemployment Insurance Benefit,? Shigeru Fujita reviews some of the academic literature on the economic effects of UI benefits. On the one hand, UI can improve people?s well being because it helps them avoid a large drop in consumption in the face of job losses when job losers do not have enough savings. On the other hand, there is a concern that it might produce an adverse effect on the incentive to look for a job. The author covers leading theoretical as well as empirical studies, which are useful in evaluating the recent expansion of unemployment insurance benefits.

Suggested Citation

  • Shigeru Fujita, 2010. "Economic effects of the unemployment insurance benefit," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 20-27.
    • Handle: RePEc:fip:fedpbr:y:2010:i:q4:p:20-27
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    References listed on IDEAS

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    1. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    2. David Card & Raj Chetty & Andrea Weber, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," American Economic Review, American Economic Association, vol. 97(2), pages 113-118, May.
    3. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(1), pages 113-126.
    4. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
    5. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, April.
    6. Fallick, Bruce Chelimsky, 1991. "Unemployment Insurance and the Rate of Re-employment of Displaced Workers," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 228-235, May.
    7. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, April.
    8. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
    9. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
    10. Raj Chetty, 2008. "Moral Hazard vs. Liquidity and Optimal Unemployment Insurance," NBER Working Papers 13967, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Casey B. Mulligan, 2012. "The ARRA: Some Unpleasant Welfare Arithmetic," NBER Working Papers 18591, National Bureau of Economic Research, Inc.
    2. Régis Barnichon & Andrew Figura, 2014. "The Effects of Unemployment Benefits on Unemployment and Labor Force Participation: Evidence from 35 Years of Benefits Extensions," Finance and Economics Discussion Series 2014-65, Board of Governors of the Federal Reserve System (U.S.).
    3. Nakajima, Makoto, 2012. "A quantitative analysis of unemployment benefit extensions," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 686-702.
    4. Jesse Rothstein, 2011. "Unemployment Insurance and Job Search in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 143-213.
    5. Andreas I. Mueller & Jesse Rothstein & Till M. von Wachter, 2016. "Unemployment Insurance and Disability Insurance in the Great Recession," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 445-475.
    6. Lei Fang & Jun Nie, 2014. "Human Capital Dynamics and the U.S. Labor Market," FRB Atlanta Working Paper 2014-2, Federal Reserve Bank of Atlanta.
    7. Yu-Ling Chang, 2020. "Does State Unemployment Insurance Modernization Explain the Trajectories of Economic Security Among Working Households? Longitudinal Evidence from the 2008 Survey of Income and Program Participation," Journal of Family and Economic Issues, Springer, vol. 41(2), pages 200-217, June.
    8. Christian Glocker, 2012. "Unemployment compensation and aggregate fluctuations," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 59(1), pages 21-39, March.
    9. Jun Nie & Ethan Struby, 2011. "Would active labor market policies help combat high U.S. unemployment?," Economic Review, Federal Reserve Bank of Kansas City, vol. 96(Q III), pages 35-69.
    10. Henry S. Farber & Robert G. Valletta, 2015. "Do Extended Unemployment Benefits Lengthen Unemployment Spells?: Evidence from Recent Cycles in the U.S. Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 50(4), pages 873-909.

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    Keywords

    Unemployment insurance;

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