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Interpreting Recent Quasi-Experimental Evidence on the Effects of Unemployment Benefit Extensions

Author

Listed:
  • Marcus Hagedorn
  • Iourii Manovskii
  • Kurt Mitman
Abstract
We critically review recent methodological and empirical contributions aiming to provide a comprehensive assessment of the effects of unemployment benefit extensions on the labor market and attempt to reconcile their apparently disparate findings. We describe two key challenges facing these studies - the endogeneity of benefit durations to labor market conditions and isolating true effects of actual policies from agents' responses to expectations of future policy changes. Marinescu (2015) employs a methodology that does not attempt to address these challenges. A more innovative approach in Coglianese (2015) and Chodorow-Reich and Karabarbounis (2016) attempts to overcome these challenges by exploiting a sampling error in unemployment rates as an exogenous variation. Unfortunately, we find that this approach falls prey to the very problems it aims to overcome and it appears unlikely that the fundamental bias at the core of this approach can be overcome. We find more promising the approach based on unexpected policy changes as in the recent contributions by Johnston and Mas (2015) and Hagedorn, Manovskii and Mitman (2015). This approach by design addresses the problem of benefit endogeneity. It does not, however, fully address the effects of expectations and generally yields a lower bound on the actual effects of policies.

Suggested Citation

  • Marcus Hagedorn & Iourii Manovskii & Kurt Mitman, 2016. "Interpreting Recent Quasi-Experimental Evidence on the Effects of Unemployment Benefit Extensions," NBER Working Papers 22280, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22280
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    References listed on IDEAS

    as
    1. Carling, Kenneth & Holmlund, Bertil & Vejsiu, Altin, 2001. "Do Benefit Cuts Boost Job Finding? Swedish Evidence from the 1990s," Economic Journal, Royal Economic Society, vol. 111(474), pages 766-790, October.
    2. Marinescu, Ioana, 2017. "The general equilibrium impacts of unemployment insurance: Evidence from a large online job board," Journal of Public Economics, Elsevier, vol. 150(C), pages 14-29.
    3. Marcus Hagedorn & Iourii Manovskii & Kurt Mitman, 2015. "The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?," NBER Working Papers 20884, National Bureau of Economic Research, Inc.
    4. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
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    7. Gabriel Chodorow-Reich & Loukas Karabarbounis, 2016. "The Limited Macroeconomic Effects of Unemployment Benefit Extensions," NBER Working Papers 22163, National Bureau of Economic Research, Inc.
    8. 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.
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    11. Marcus Hagedorn & Fatih Karahan & Iourii Manovskii & Kurt Mitman, 2013. "Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects," NBER Working Papers 19499, National Bureau of Economic Research, Inc.
    12. Andrew C. Johnston & Alexandre Mas, 2018. "Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2480-2522.
    13. Jushan Bai, 2009. "Panel Data Models With Interactive Fixed Effects," Econometrica, Econometric Society, vol. 77(4), pages 1229-1279, July.
    14. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
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    Citations

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    Cited by:

    1. Jochen Mankart & Rigas Oikonomou, 2017. "Household Search and the Aggregate Labour Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(4), pages 1735-1788.
    2. Camille Landais & Pascal Michaillat & Emmanuel Saez, 2018. "A Macroeconomic Approach to Optimal Unemployment Insurance: Applications," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 182-216, May.
    3. Andrew Figura & David Ratner, 2017. "How Large were the Effects of Emergency and Extended Benefits on Unemployment during the Great Recession and its Aftermath?," Finance and Economics Discussion Series 2017-068, Board of Governors of the Federal Reserve System (U.S.).
    4. Steven Dieterle & Otávio Bartalotti & Quentin Brummet, 2020. "Revisiting the Effects of Unemployment Insurance Extensions on Unemployment: A Measurement-Error-Corrected Regression Discontinuity Approach," American Economic Journal: Economic Policy, American Economic Association, vol. 12(2), pages 84-114, May.
    5. Mitman, Kurt & Rabinovich, Stanislav, 2019. "Do Unemployment Benefit Extensions Explain the Emergence of Jobless Recoveries?," CEPR Discussion Papers 13760, C.E.P.R. Discussion Papers.
    6. Marinescu, Ioana, 2017. "The general equilibrium impacts of unemployment insurance: Evidence from a large online job board," Journal of Public Economics, Elsevier, vol. 150(C), pages 14-29.
    7. Brown, Alessio J.G. & Kohlbrecher, Britta & Merkl, Christian & Snower, Dennis J., 2021. "The effects of productivity and benefits on unemployment: Breaking the link," Economic Modelling, Elsevier, vol. 94(C), pages 967-980.
    8. Aiwei Huang, 2021. "To What Extent do Labor Market Outcomes respond to UI Extensions?," Papers 2104.12387, arXiv.org.
    9. Gustavo de Souza & Andre Luduvice, 2022. "Optimal Unemployment Insurance Requirements," Working Paper Series WP 2022-45, Federal Reserve Bank of Chicago.
    10. Christopher Boone & Arindrajit Dube & Lucas Goodman & Ethan Kaplan, 2021. "Unemployment Insurance Generosity and Aggregate Employment," American Economic Journal: Economic Policy, American Economic Association, vol. 13(2), pages 58-99, May.
    11. Bachmann, Rüdiger & Gödl-Hanisch, Isabel & Sims, Eric R., 2022. "Identifying monetary policy shocks using the central bank’s information set," Journal of Economic Dynamics and Control, Elsevier, vol. 145(C).
    12. Marinescu, Ioana, 2019. "Reprint of: The general equilibrium impacts of unemployment insurance: Evidence from a large online job board," Journal of Public Economics, Elsevier, vol. 171(C), pages 70-85.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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