Do Extended Unemployment Benefits Lengthen Unemployment Spells? Evidence from Recent Cycles in the U.S. Labor Market

Henry S Farber () and Robert Valletta
Additional contact information
Henry S Farber: Princeton University

No 7347, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In response to the Great Recession and sustained labor market downturn, the availability of unemployment insurance (UI) benefits was extended to historical highs in the United States. We exploit variation in the timing and size of UI benefit extensions across states to estimate the overall impact of these extensions on unemployment duration, comparing the experience with the prior extension of benefits during the much milder downturn in the early 2000s. Using monthly matched individual data from the U.S. Current Population Survey (CPS) for the periods 2000-2005 and 2007-2012, we estimate the effects of UI extensions on unemployment transitions and duration. We rely on individual variation in benefit availability based on the duration of unemployment spells and the length of UI benefits available in the state and month, conditional on state economic conditions and individual characteristics. We find a small but statistically significant reduction in the unemployment exit rate and a small increase in the expected duration of unemployment arising from both sets of UI extensions. The effect on exits and duration is primarily due to a reduction in exits from the labor force rather than a decrease in exits to employment (the job finding rate). The magnitude of the overall effect on exits and duration is similar across the two episodes of benefit extensions. Although the overall effect of UI extensions on exits from unemployment is small, it implies a substantial effect of extended benefits on the steady-state share of unemployment in the cross-section that is long-term.

Keywords: unemployment insurance; unemployment duration; unemployment (search for similar items in EconPapers)
JEL-codes: J64 J65 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2013-04
New Economics Papers: this item is included in nep-ias, nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (77)

Published - revised version published in: Journal of Human Resources, 2015, 50(4), 873-909

Downloads: (external link)
https://docs.iza.org/dp7347.pdf (application/pdf)

Related works:
Journal Article: Do Extended Unemployment Benefits Lengthen Unemployment Spells?: Evidence from Recent Cycles in the U.S. Labor Market (2015)
Working Paper: Do Extended Unemployment Benefits Lengthen Unemployment Spells? Evidence from Recent Cycles in the U.S. Labor Market (2013)
Working Paper: Do Extended Unemployment Benefits Lengthen Unemployment Spells? Evidence from Recent Cycles in the U.S. Labor Market (2013)
Working Paper: Do Extended Unemployment Benefits Lengthen Unemployment Spells? Evidence from Recent Cycles in the U.S. Labor Market (2013)
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:iza:izadps:dp7347

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().