Assessing the (De)Stabilizing Effects of Unemployment Benefit Extensions

Alexey Gorn and Antonella Trigari (antonella.trigari@unibocconi.it)

No 202111, Working Papers from University of Liverpool, Department of Economics

Abstract: We study the stabilizing role of unemployment benefit extensions. We develop a tractable quantitative model with heterogeneous agents, search frictions, and nominal rigidities. The model allows for both a stabilizing aggregate demand channel and a destabilizing labor market channel of unemployment insurance. We characterize analytically the workings of each channel. Stabilizing aggregate demand effects marginally prevail in the U.S. economy and the unprecedented benefit extensions introduced during the Great Recession played a limited role for unemployment dynamics. Instead, unemployment from the model tracks actual unemployment with a combination of labor market shocks and a shock to the consumers’ borrowing capacity

Keywords: Unemployment insurance; cyclical benefit extensions; heterogeneous agents; redistribution; precautionary motives; opportunity cost of employment; nominal rigidities; search frictions (search for similar items in EconPapers)
JEL-codes: E24 E32 E52 J63 J64 J65 (search for similar items in EconPapers)
Pages: 73 pages
Date: 2021
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab and nep-mac
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Forthcoming

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https://www.liverpool.ac.uk/media/livacuk/schoolof ... onomics/wp202111.pdf First version, 2021 (application/pdf)

Related works:
Journal Article: Assessing the Stabilizing Effects of Unemployment Benefit Extensions (2024)
Working Paper: Assessing the Stabilizing Effects of Unemployment Benefit Extensions (2023)
Working Paper: Assessing the Stabilizing Effects of Unemployment Benefit Extensions (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:liv:livedp:202111

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