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The Immediate Hardship of Unemployment: Evidence from the US Unemployment Insurance System

Author

Listed:
  • Mark Stater

    (Department of Economics, Trinity College)

  • Jeffrey B Wenger

    (Department of Public Administration and Policy, The University of Georgia
    NIH/NIA Research Fellow in the Study of Aging, RAND Corporation)

Abstract

We examine how the reservation wage varies with the waiting time to apply for unemployment benefits. We find that the waiting time has a negative effect on the reservation wage, suggesting that unemployment generates significant and immediate harm for the unemployed. Our results are unique in that they are based on short-term, incomplete spells of unemployment that are precisely measured in weeks. We address the endogeneity of the waiting time using instrumental variables associated with errors in the unemployment insurance (UI) claim, and note that our estimates are likely a lower bound for the welfare declines experienced by the unemployed.

Suggested Citation

  • Mark Stater & Jeffrey B Wenger, 2017. "The Immediate Hardship of Unemployment: Evidence from the US Unemployment Insurance System," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 43(1), pages 17-36, January.
    • Handle: RePEc:pal:easeco:v:43:y:2017:i:1:d:10.1057_eej.2015.22
    DOI: 10.1057/eej.2015.22
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    References listed on IDEAS

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