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How Income Changes During Unemployment: Evidence from Tax Return Data

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  • Laura Kawano
  • Sara LaLumia

Abstract

We use a panel of tax returns spanning 1999 to 2011 to provide evidence on household experiences during unemployment. A period of unemployment is associated with a 20 percent reduction in annual household wage earnings. Unemployment insurance (U.I.) compensates for half of lost wages. Households also partially compensate using a variety of income sources. Distributions from retirement accounts increase in the short run. Self-employment income and disability insurance payments increase over longer periods. More generous U.I. benefits crowd out wage income and are associated with increased retirement account distributions. This combination of responses is consistent with U.I. benefits lengthening unemployment spells.

Suggested Citation

  • Laura Kawano & Sara LaLumia, 2017. "How Income Changes During Unemployment: Evidence from Tax Return Data," Journal of Human Resources, University of Wisconsin Press, vol. 52(2), pages 418-456.
    • Handle: RePEc:uwp:jhriss:v:52:y:2017:i:2:p:418-456
    Note: DOI: 10.3368/jhr.52.2.0414-6319R2
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    File URL: http://jhr.uwpress.org/cgi/reprint/52/2/418
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    Cited by:

    1. Fagereng, Andreas & Onshuus, Helene & Torstensen, Kjersti N., 2024. "The consumption expenditure response to unemployment: Evidence from Norwegian households," Journal of Monetary Economics, Elsevier, vol. 146(C).
    2. Danny Yagan, 2019. "Employment Hysteresis from the Great Recession," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2505-2558.
    3. Eduardo Ignacio Polo-Muro, 2021. "The effect of labor market shocks on mental health outcomes: evidence from the Spanish Great Recession," Working Papers 21.08, Universidad Pablo de Olavide, Department of Economics.
    4. Aaron Albert, 2018. "Parental duties, labor market behavior, and single fatherhood in America," Review of Economics of the Household, Springer, vol. 16(4), pages 1063-1083, December.
    5. Javier Gardeazabal & Eduardo Polo-Muro, 2022. "Cultural expenditure of those who enter (or exit) unemployment," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 46(4), pages 571-596, December.

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