The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013

Abstract

We provide new evidence on the effect of the unemployment insurance (UI) weekly benefit amount on unemployment insurance spells based on administrative data from the state of Missouri covering the period 2003-2013. Identification comes from a regression kink design that exploits the quasi-experimental variation around the kink in the UI benefit schedule. We find that UI durations are more responsive to benefit levels during the recession and its aftermath, with an elasticity between 0.65 and 0.9 as compared to about 0.35 pre-recession.

Openness and Structural Labor Market Reforms: Ex Ante Counterfactuals

“…Interestingly, the study did not find any increase in the quality of the postunemployment job (longer benefit payoffs are often advocated to allow for a better job match). In a separate study, Card et al (2015) find that the effect on unemployment spells is more pronounced during or in the aftermath of recessions. Having these results in mind, the initially proposed unemployment benefit design (especially due to longer payoffs) seems likely to cause adverse effects on unemployment spells.…”

Welfare Benefits and Unemployment in Affluent Democracies: The Moderating Role of the Institutional Insider/Outsider Divide

“…Both views have been tested in a multitude of case studies and macro comparative analyses. Some of this work offers empirical support for the disincentive argument (e.g., Card et al 2015; Lalive 2007; Meyer 1990; Nickell 1997); other work supports the job-search-subsidy argument (e.g., Gangl 2004, 2006; Nelson and Stephens 2012). Moreover, critical assessments of the literature have convincingly called into question the existing results, particularly in regard to how micro-level mechanisms play out at the aggregate level (Atkinson and Micklewright 1991; Avdagic and Salardi 2013; Baccaro and Rei 2007; Baker et al 2005; Howell and Rehm 2009; Sjöberg 2000).…”

“…A large body of research argues that generous benefits for jobseekers create a disincentive to work, which raises unemployment levels (e.g., Card et al 2015, Lalive 2007; Layard et al 2005; Meyer 1990; Nickell 1997). The disincentive perspective is based on the theoretical argument that individuals’ reservation wages increase when high living standards can be achieved without having to work.…”

“…Many quantitative studies have tested the disincentive perspective. Micro-level studies usually look at policy shifts and explore whether they lead to changes in the duration of individual unemployment spells (e.g., Card et al 2015; Lalive 2007; van Ours and Vodopivec 2006). Meyer (1990), for instance, showed that higher benefits lead to fewer exits from unemployment in the United States.…”

Health benefits of social insurance

“…The slow economic recovery after the Great Recession accompanied by larger payments and longer duration of payments stimulated a strand of studies revisiting the social costs and benefits of the UI program (Barr & Turner, 2015; Bitler & Hoynes, 2016; Card, Johnston, Leungs, Mas, and Pei, 2015; Card & Mas, 2016; Farber & Valletta, 2015; Howell & Azizoglu, 2011; Mueller, Rothstein, & Von Wachter, 2016; Tatsiramos & van Ours, 2014), as well as its unintended and unplanned externalities on other outcomes including crime (Beach & Lopresti, 2019), foreclosure (Hsu, Matsa, & Melzer, 2018), alcohol abuse (Lantis & Teahan, 2018), cigarette smoking (Fu & Liu, 2019), health (Kuka, 2018), mental health (Tefft, 2011), college enrollment (Barr & Turner, 2015), and children's educational outcomes (Regmi, 2019).…”