Assessing the Welfare Effects of Unemployment Benefits Using the Regression Kink Design

Camille Landais

No 7589, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: I investigate in this paper partial equilibrium labor supply responses to unemployment insurance (UI) in the US. I use administrative data on the universe of unemployment spells in five states from the late 1970s to 1984, and non-parametrically identify the effect of both benefit level and potential duration in the regression kink (RK) design using kinks in the schedule of UI benefits. I provide many tests for the robustness of the RK design, and demonstrate its validity to overcome the traditional issue of endogeneity in UI benefit variations on US data. I also show how, in the tradition of the dynamic labor supply literature, one can identify the purely distortionary effects of UI using variations along the returns-to-employment profile brought about by exogenous variations in the benefit level as well as in the benefit duration. I then use these estimates to calibrate the welfare effects of an increase in UI benefit level and in UI potential duration.

Keywords: unemployment insurance; regression kink design (search for similar items in EconPapers)
JEL-codes: J22 (search for similar items in EconPapers)
Pages: 84 pages
Date: 2013-08
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Assessing the Welfare Effects of Unemployment Benefits Using the Regression Kink Design (2015)
Working Paper: Assessing the welfare effects of unemployment benefits using the regression kink design (2015)
Working Paper: Assessing the welfare effects of unemployment benefits using the regression kink design (2012)
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