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Delayed collection of unemployment insurance in recessions

Zoe Xie

European Economic Review, 2019, vol. 118, issue C, 274-295

Abstract: Using variations in UI policies over time and across U.S. states, this paper provides evidence that allowing unemployed workers to delay the collection of benefits increases their job-finding rate. In a model with discrete job take-up decisions, benefit entitlement, wage-indexed benefits, and heterogeneous job types, I demonstrate that the policy can increase an unemployed worker’s willingness to work, even though more benefits in general reduce the relative value of employment. In a calibrated quantitative model, I find that allowing delayed benefit collection increases the overall job finding rates and may lower unemployment rate both in a steady state stationary economy and over a transition path during 2008–2012.

Keywords: Unemployment insurance; Social program design; Great recession (search for similar items in EconPapers)
JEL-codes: E24 J65 (search for similar items in EconPapers)
Date: 2019
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