The Long-Term Effects of Unemployment Insurance Extensions on Employment

Johannes Schmieder, Till von Wachter and Stefan Bender ()

No 17814, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The majority of papers analyzing the employment effects of unemployment insurance (UI) benefit durations focuses on the duration of the first unemployment spell. In this paper, we make two contributions. First, we use a regression discontinuity design to analyze the long-term effects of extensions in UI durations. These estimates differ from standard estimates that they incorporate differences in UI benefit receipt and employment due to recurrent unemployment spells. Second, we derive a welfare formula of UI extensions that incorporates recurrent nonemployment spells. We find that accounting for nonemployment beyond the initial spell leads to a significant reduction in estimates of the nonemployment effect of UI extensions by about 25 percent. We show this effect is only partly explained by a mechanical effect due to finite follow-up durations, and mainly arises from a lower probability of days in nonemployment in months after end of the initial nonemployment spell.

JEL-codes: J64 J65 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-ias and nep-lab
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Published as Schmieder, Johannes F., Till von Wachter, and Stefan Bender. 2012. "The Long-Term Effects of UI Extensions on Employment." American Economic Review, 102(3): 514–19.

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