The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?

Hagedorn, Marcus; Manovskii, Iourii; Mitman, Kurt

doi:10.3386/w20884

Cited by 83 publications

(88 citation statements)

References 15 publications

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“…62 This precautionary saving motive in the face of increased idiosyncratic risk in recessions, also discussed lucidly in a recent paper by McKay (2015), is absent among households that follow a mechanical hand-to-mouth consumption rule and is responsible for the deeper recession in the benchmark economy. 63 We will return to this point in the next section, where we study the impact of the generosity of unemployment insurance on our results, and will show that with less generous unemployment insurance benefits, the additional precautionary savings motive from elevated unemployment risk is more potent, and the divergence between the class of models studied here and hand-to-mouth consumer models is even more significant.…”

Section: The Importance Of Precautionary Saving Vs "Hand-to-mouth" Cmentioning

confidence: 99%

Macroeconomics and Household Heterogeneity

Krueger

Mitman

Perri

2016

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The goal of this chapter is to study how, and by how much, household income, wealth, and preference heterogeneity amplify and propagate a macroeconomic shock. We focus on the U.S. Great Recession of 2007-2009 and proceed in two steps. First, using data from the Panel Study of Income Dynamics, we document the patterns of household income, consumption and wealth inequality before and during the Great Recession. We then investigate how households in different segments of the wealth distribution were affected by income declines, and how they changed their expenditures differentially during the aggregate downturn. Motivated by this evidence, we study several variants of a standard heterogeneous household model with aggregate shocks and an endogenous cross-sectional wealth distribution. Our key finding is that wealth inequality can significantly amplify the impact of an aggregate shock, and it does so if the distribution features a sufficiently large fraction of households with very little net worth that sharply increase their saving (i.e. they are not hand-to mouth) as the recession hits. We document that both these features are observed in the PSID. We also investigate the role that social insurance policies, such as unemployment insurance, play in shaping the cross-sectional income and wealth distribution, and through it, the dynamics of business cycles.

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Section: The Importance Of Precautionary Saving Vs "Hand-to-mouth" Cmentioning

confidence: 99%

Macroeconomics and Household Heterogeneity

Krueger

Mitman

Perri

2016

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“…Table 3 displays the resulting wealth distribution for our benchmark model with idiosyncratic income risk, incomplete markets, a rudimentary life cycle structure, unemployment insurance and heterogeneous discount factors, as well as the distribution of net worth implied by the original Krusell-Smith (1998) model (with our calibration of aggregate and idiosyncratic employment risk), as well as the empirical crosssectional wealth distribution from section 2. 21 Through appropriate choice of the time discount factor(s) both model economies have the same average (over the business cycle) capital-output ratio, and the benchmark economy displays a wealth Gini coefficient in line with the micro data. All other moments of the wealth distribution were not targeted in the calibration.…”

Section: Wealth Inequality In the Benchmark Economymentioning

confidence: 93%

“…al. (2013) and Hagedorn, Manovskii and Mitman (2015) who find large negative effects of unemployment benefit extensions on vacancy creation and employment, respectively, and Mitman and Rabinovich (2014) who argue that unemployment benefit extensions can explain the "jobless recovery" that followed the Great Recession.…”

Section: Ui Shockmentioning

confidence: 99%

“…The problem relative to the data is two-fold: households at the top of the wealth distribution are not nearly wealthy enough, and households at the bottom of the distribution hold significantly too much wealth in the model, relative to SCF or PSID micro data. 22 As a summary measure, whereas the wealth Gini in the data is close to 0.8 in the working age-population, it is only 0.35 in 21 Recall that in the data, we restrict attention to households with at least one member of working age.…”

Section: Wealth Inequality In the Benchmark Economymentioning

confidence: 99%

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On the Distribution of the Welfare Losses of Large Recessions

Krueger¹,

Mitman²,

Perri³

2016

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How big are the welfare losses from severe economic downturns, such as the U.S. Great Recession?How are those losses distributed across the population? In this paper we answer these questions using a canonical business cycle model featuring household income and wealth heterogeneity that matches micro data from the Panel Study of Income Dynamics (PSID). We document how these losses are distributed across households and how they are affected by social insurance policies. We find that the welfare cost of losing one's job in a severe recession ranges from 2% of lifetime consumption for the wealthiest households to 5% for low-wealth households. The cost increases to approximately 8%for low-wealth households if unemployment insurance benefits are cut from 50% to 10%. The fact that welfare losses fall with wealth, and that in our model (as in the data) a large fraction of households has very low wealth, implies that the impact of a severe recession, once aggregated across all households, is very significant (2.2% of lifetime consumption). We finally show that a more generous unemployment insurance system unequivocally helps low-wealth job losers, but hurts households that keep their job, even in a version of the model in which output is partly demand determined, and therefore unemployment insurance stabilizes aggregate demand and output.

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“…To address these concerns we perform a variable transformation similar in spirit to Dube et al (2016) and Hagedorn et al (2015). Consider two contiguous counties, i and j, that straddle a state border.…”

Section: Border Discontinuitymentioning

confidence: 99%

Entrepreneurship and State Taxation

Curtis

Decker

2018

FEDS

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Entrepreneurship plays a vital role in the economy, yet there exists little well-identified research into the effects of taxes on startup activity. Using recently developed county-level data on startups, we examine the effect of states' corporate, personal and sales tax rates on new firm activity and test for cross-border spillovers in response to these policies. We find that new firm employment is negatively-and disproportionately-affected by corporate tax rates. We find little evidence of an effect of personal and sales taxes on entrepreneurial outcomes. Our results are robust to changes in the tax base and other state-level policies.JEL Codes: L26, D22, H71, H25, J23

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The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?

Cited by 83 publications

References 15 publications

Macroeconomics and Household Heterogeneity

Macroeconomics and Household Heterogeneity

On the Distribution of the Welfare Losses of Large Recessions

Entrepreneurship and State Taxation

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