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Macroeconomic Effects of UI Extensions at Short and Long Durations

Emi Nakamura - University of California, Berkeley
Wed, May 10 2023, 3:30pm - 5:00pm PDT
GSB Bass Center, Room B400
655 Knight Way, Stanford

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Joint Applied Micro Seminar

We study the macroeconomic effects of unemployment insurance (UI) benefit extensions in the United States at short and long durations. To do this, we develop a new state level dataset on trigger variables for UI extensions and a "UI benefit calculator" based on detailed legislative and administrative sources spanning five decades. Our identification approach exploits variation across states in the options governing the Extended Benefits program. Our estimates imply that UI extensions during time periods when UI benefit durations are already long -- such as in the Great Recession -- have minimal effects. However, UI extensions at shorter initial durations have substantial effects on the unemployment rate and the number of people receiving UI. We relate these estimates to the existing microeconomic evidence on the effects of UI extensions through the lens of an equilibrium search-and-matching model.