Unintended Consequences of Unemployment Insurance Benefits: The Role of Banks

Yavuz Arslan, Ahmet Degerli () and Gazi Kabaş
Additional contact information
Ahmet Degerli: Financial Intermediaries Analysis Section, Monetary Affairs Division, Federal Reserve Board, Washington, District of Columbia 20006

Management Science, 2025, vol. 71, issue 4, 2847-2866

Abstract: We use disaggregated U.S. data and a border discontinuity design to show that more generous unemployment insurance (UI) policies lower bank deposits. We test several channels that could explain this decline and find evidence consistent with households lowering their deposit holdings due to reduced precautionary savings. Because deposits are the largest and most stable source of funding for banks, the decrease in deposits affects bank lending. Banks that raise deposits in states with generous UI policies reduce their loan supply to small businesses. Furthermore, counties that are served by these banks experience a higher unemployment rate and lower wage growth.

Keywords: bank funding; bank lending; precautionary saving; unemployment insurance; deposits (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2022.03217 (application/pdf)

Related works:
Working Paper: Unintended consequences of unemployment insurance benefits: The role of banks (2025)
Working Paper: Unintended Consequences of Unemployment Insurance Benefits: The Role of Banks (2021)
Working Paper: Unintended consequences of unemployment insurance benefits: the role of banks (2019)
Working Paper: Unintended Consequences of Unemployment Insurance Benefits: The Role of Banks (2019)
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:inm:ormnsc:v:71:y:2025:i:4:p:2847-2866

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().