The Effect of Unemployment Insurance Eligibility in Equilibrium

Ying Chao (), Benjamin Griffy () and David Wiczer
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Ying Chao: https://econ.unc.edu/people/chao-ying/

No 2025-6, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: In the United States, workers whose past earnings were below a threshold are generally ineligible for unemployment insurance (UI), creating a discontinuous jump in the value of being unemployed. Using a regression discontinuity design with administrative panel data, we estimate a sizable local effect from UI eligibility on earnings in the next employer, around 10 percent per quarter. This evidence, however, understates UI’s causal effect because of endogenous non-compliance. It also does not distinguish between underlying reasons for higher re-employment earnings, a higher share of production, or more productive matches. These are addressed through a quantitative model. The underlying causal effect is 50 percent higher than the empirical estimates, and nearly all of the effect comes from workers getting a larger share.

Keywords: unemployment insurance; directed search; earnings (search for similar items in EconPapers)
JEL-codes: E24 E30 J62 J63 J64 (search for similar items in EconPapers)
Pages: 41
Date: 2025-07-14
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Published in 2025

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DOI: 10.29338/wp2025-06

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