Expanding Unemployment Insurance Coverage

Amanda Michaud

No 67, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

Abstract: This paper develops a quantitative framework to study the impact of Unemployment Insurance (UI) expansions to workers earning below eligibility thresholds. A model of how UI affects welfare and labor supply is developed and calibrated with microeconomic data, including consumption. The model predicts that the current ineligible would choose to stay on UI longer than the current eligible and the margins of why this is the case are quantified. The model is applied to the Great Recession by identifying ineligible workers in the data using machine learning and to an actual expansion during COVID-19 using administrative data. The UI duration for newly eligible under the expansion was 1.7 times longer than the previous eligible but is one-third shorter than the model's economic incentives predict. This suggests caution in extrapolating from the COVID-19 data and the model is used to predict impacts of smaller scale expansions during non-pandemic times.

Keywords: Labor supply; Business cycles; Unemployment insurance (search for similar items in EconPapers)
JEL-codes: E24 E32 J20 J65 (search for similar items in EconPapers)
Date: 2023-03-27
New Economics Papers: this item is included in nep-big, nep-dge and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:95879

DOI: 10.21034/iwp.67

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