How Income Changes During Unemployment: Evidence from Tax Return Data

Sara LaLumia and Laura Kawano

No 2013-05, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: We use a panel of tax returns spanning 1999 to 2011 to provide new evidence on household experiences during unemployment. Unemployment is associated with roughly a 20% reduction in household wage earnings. Unemployment insurance compensates for half of these wage losses. Households also partially compensate by using a variety of income sources. Distributions from retirement accounts increase in the short run. Self-employment income and disability insurance payments increase over longer periods. More generous UI benefits crowd out wage income and are associated with increased distributions from retirement accounts. This combination of responses is consistent with UI benefits lengthening unemployment spells.

Pages: 53 pages
Date: 2013-03, Revised 2015-03
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Journal Article: How Income Changes During Unemployment: Evidence from Tax Return Data (2017)
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