Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects

Marcus Hagedorn, Fatih Karahan, Iourii Manovskii and Kurt Mitman

No 19499, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Equilibrium labor market theory suggests that unemployment benefit extensions affect unemployment by impacting both job search decisions by the unemployed and job creation decisions by employers. The existing empirical literature focused on the former effect only. We develop a new methodology necessary to incorporate the measurement of the latter effect. Implementing this methodology in the data, we find that benefit extensions raise equilibrium wages and lead to a sharp contraction in vacancy creation, employment, and a rise in unemployment.

JEL-codes: E24 J63 J64 J65 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab and nep-mac
Note: EFG
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Citations: View citations in EconPapers (165)

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Working Paper: Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects (2013)
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