The Impact of the Federal Pandemic Unemployment Compensation on Job Search and Vacancy Creation

Ioana Marinescu, Daphne Skandalis and Daniel Zhao

No 28567, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: During the COVID-19 pandemic, the Federal Pandemic Unemployment Compensation (FPUC) increased US unemployment benefits by $600 a week. Theory predicts that FPUC will decrease job applications, and could decrease vacancy creation. We estimate the effect of FPUC on job applications and vacancy creation week by week, from March to July 2020, using granular data from the online jobs platform Glassdoor. We exploit variation in the proportional increase in benefits across local labor markets. To isolate the effect of FPUC, we flexibly allow for different trends in local labor markets differentially exposed to the COVID-19 crisis. We verify that trends in outcomes prior to the FPUC do not correlate with future increases in benefits, which supports our identification assumption. First, we find that a 10% increase in unemployment benefits caused a 3.6% decline in applications, but did not decrease vacancy creation; hence, FPUC increased tightness (vacancies/applications). Second, we document that tightness was unusually depressed during the FPUC period. Altogether, our results imply that the positive effect of FPUC on tightness was welfare improving: FPUC decreased competition among applicants at a time when jobs were unusually scarce. Our results also help explain prior findings that FPUC did not decrease employment.

JEL-codes: J63 J64 J65 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-lab
Note: LS PE
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Citations: View citations in EconPapers (37)

Published as Marinescu, Ioana & Skandalis, Daphné & Zhao, Daniel, 2021. "The impact of the Federal Pandemic Unemployment Compensation on job search and vacancy creation," Journal of Public Economics, Elsevier, vol. 200(C).

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Journal Article: The impact of the Federal Pandemic Unemployment Compensation on job search and vacancy creation (2021)
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