Whether, when and how to extend unemployment benefits: Theory and application to COVID-19

Kurt Mitman and Stanislav Rabinovich

Journal of Public Economics, 2021, vol. 200, issue C

Abstract: We investigate the optimal response of unemployment insurance to economic shocks, both with and without commitment. The optimal policy with commitment follows a modified Baily-Chetty formula that accounts for job search responses to future UI benefit changes. As a result, the optimal policy with commitment tends to front-load UI, unlike the optimal discretionary policy. In response to shocks intended to mimic those that induced the COVID-19 recession, we find that a large and transitory increase in UI is optimal; and that a policy rule contingent on the change in unemployment, rather than its level, is a good approximation to the optimal policy.

Keywords: Unemployment insurance; Optimal Policy; COVID-19 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272721000839
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Whether, When and How to Extend Unemployment Benefits: Theory and Application to COVID-19 (2021)
Working Paper: Whether, When and How to Extend Unemployment Benefits: Theory and Application to COVID-19 (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:200:y:2021:i:c:s0047272721000839

DOI: 10.1016/j.jpubeco.2021.104447

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().