The Importance of Unemployment Insurance as an Automatic Stabilizer

Marco Di Maggio and Amir Kermani

No 22625, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We assess the extent to which unemployment insurance (UI) serves as an automatic stabilizer to mitigate the economy's sensitivity to shocks. Using a local labor market design based on heterogeneity in local benefit generosity, we estimate that a one standard deviation increase in generosity attenuates the effect of adverse shocks on employment growth by 7% and on earnings growth by 6%. Consistent with a local demand channel, we find that consumption is less responsive to local labor demand shocks in counties with more generous benefits. Our analysis finds that the local fiscal multiplier of unemployment insurance expenditure is approximately 1.9.

JEL-codes: E24 E62 H53 J65 (search for similar items in EconPapers)
Date: 2016-09
New Economics Papers: this item is included in nep-ias, nep-lab, nep-mac and nep-sog
Note: EFG LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

Downloads: (external link)
http://www.nber.org/papers/w22625.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:nbr:nberwo:22625

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w22625

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().