Unemployment Insurance Take-up Rates in an Equilibrium Search Model

David Fuller, Damba Lkhagvasuren and Stéphane Auray

No 496, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: From 1989-2012, on average 23% of those eligible for unemployment insurance (UI) benefits in the US did not collect them. In a search model with matching frictions, asymmetric information associated with the UI non-collectors implies an inefficiency in non-collector outcomes. This inefficiency is characterized along with the key features of collector vs. non-collector allocations. Specifically, the inefficiency implies that non-collectors transition to employment at a faster rate and a lower wage than the efficient levels. Quantitatively, the inefficiency amounts to 1.71% welfare loss in consumption equivalent terms for the average worker, with a 3.85% loss conditional on non-collection. With an endogenous take-up rate, the unemployment rate and average duration of unemployment respond significantly slower to changes in the UI benefit level, relative to the standard model with a 100% take-up rate.

Date: 2018
New Economics Papers: this item is included in nep-dge and nep-ias
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Related works:
Journal Article: Unemployment insurance take-up rates in an equilibrium search model (2019)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2018)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2017)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2013)
Working Paper: Unemployment Insurance Take-up Rate"s in an Equilibrium Search Model (2013)
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