Unemployment Insurance, Starting Salaries, and Jobs

Gordon Dahl and Matthew Knepper ()

No 30152, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the labor market effects of permanent 23-50% reductions in unemployment insurance benefits available in seven states. Leveraging linked firm-establishment data, we find that establishments based in reform states experience 1.5-2.4% faster employment growth relative to the same firm's establishments in other states. Using a similar multi-state firm design, starting salaries are 1.8-7.2% lower in reform states and posted salaries for the same job fall by 1.4-5.5%. These labor supply shocks yield an average labor demand elasticity of -1.0. Our results reveal a substantial decline in match quality and worker bargaining power as UI benefits become less generous.

JEL-codes: J38 J64 J65 (search for similar items in EconPapers)
Date: 2022-06
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