A Quantitative Analysis of Unemployment Benefit Extensions

Makoto Nakajima ()

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper measures the effect of extensions of unemployment insurance (UI) benefits on the unemployment rate using a calibrated structural model that features job search and consumption-saving decision, skill depreciation, UI eligibility, and UI benefit extensions that capture what has happened during the current downturn. I find that the extensions of UI benefits contributed to an increase in the unemployment rate by 1.2 percentage points, which is about a quarter of an observed increase during the current downturn (a 5.1 percentage point increase from 4.8 percent at the end of 2007 to 9.9 percent in the fall of 2009). Among the remaining 3.9 percentage points, 2.4 percentage points are due to the large increase in the separation rate, while the staggering job-finding probability contributes 1.4 percentage points. The last extension in December 2010 moderately slows down the recovery of the unemployment rate. Specifically, the model indicates that the last extension keeps the unemployment rate higher by up to 0.4 percentage point during 2011.

Keywords: Unemployment Insurance; Extension; Labor Market; Search; Consumption Smoothing (search for similar items in EconPapers)
JEL-codes: D83 E24 J64 J65 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-ias and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd10-175.pdf (application/pdf)

Related works:
Journal Article: A quantitative analysis of unemployment benefit extensions (2012)
Working Paper: A quantitative analysis of unemployment benefit extensions (2011)
Working Paper: Quantitative Analysis of Unemployment Benefit Extensions (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd10-175

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