Are sufficient statistics necessary? Nonparametric measurement of deadweight loss from unemployment insurance

David S. Lee, Pauline Leung, Christopher J. O’Leary, Zhuan Pei, Simon Quach

Research output: Contribution to journalArticlepeer-review

Abstract

Central to the welfare analysis of income transfer programs is the deadweight loss associated with possible reforms. To aid analytical tractability, its measurement typically requires specifying a simplified model of behavior. We employ a complementary ‘decomposition’ approach that compares the behavioral and mechanical components of a policy’s total impact on the government budget to study the deadweight loss of two unemployment insurance policies. Experimental and quasi-experimental estimates using state administrative data show that increasing the weekly benefit is more efficient (with a fiscal externality of 53 cents per dollar of mechanical transferred income) than reducing the program’s implicit earnings tax.

Original languageEnglish (US)
Pages (from-to)S455-S506
JournalJournal of Labor Economics
Volume39
Issue numberS2
DOIs
StatePublished - Apr 2021

All Science Journal Classification (ASJC) codes

  • Industrial relations
  • Economics and Econometrics

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