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

Marcus Hagedorn, Fatih Karahan, Iourii Manovskii and Kurt Mitman

No 646, Staff Reports from Federal Reserve Bank of New York

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 and employment and a rise in unemployment.

Keywords: unemployment insurance; unemployment; employment; vacancies; wages; search; matching (search for similar items in EconPapers)
JEL-codes: E24 J63 J64 J65 (search for similar items in EconPapers)
Date: 2013-10-01
New Economics Papers: this item is included in nep-ias, nep-lab and nep-mac
Note: Revised February 2015. Previous Title: "Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects"
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (81)

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr646.html Full text (text/html)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr646.pdf (application/pdf)

Related works:
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:fip:fednsr:646

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().