Assessing the Stabilizing Effects of Unemployment Benefit Extensions

Alexey Gorn and Antonella Trigari ()

No 694, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: We study the stabilizing role of benefit extensions. We develop a tractable quantitative model with heterogeneous agents, search frictions, and nominal rigidities. The model allows for a stabilizing aggregate demand channel and a destabilizing labor market channel. We characterize each channel analytically and find that aggregate demand effects quantitatively prevail in the US. When feeding-in estimated shocks, the model tracks unemployment in the two most recent downturns. We find that extensions lowered unemployment by a maximum of 0.35 pp in the Great Recession, while the joint stabilizing effect of extensions and benefit compensation peaked at 1.08 pp in the pandemic. Keywords: cyclical unemployment insurance; heterogeneous agents; search frictions; nominal rigidities; Great Recession; Covid-19 recession. JEL codes: E24, E32, E52, J63, J64, J65.

Date: 2023
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.unibocconi.it/igier/igi/wp/2023/694.pdf (application/pdf)

Related works:
Journal Article: Assessing the Stabilizing Effects of Unemployment Benefit Extensions (2024)
Working Paper: Assessing the Stabilizing Effects of Unemployment Benefit Extensions (2021)
Working Paper: Assessing the (De)Stabilizing Effects of Unemployment Benefit Extensions (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:igi:igierp:694

Ordering information: This working paper can be ordered from
https://repec.unibocconi.it/igier/igi/

Access Statistics for this paper

More papers in Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University via Rontgen, 1 - 20136 Milano (Italy).
Bibliographic data for series maintained by ().