Potential unemployment insurance duration and labor supply: The individual and market-level response to a benefit cut

Andrew C. Johnston, Alexandre Mas

Research output: Contribution to journalArticlepeer-review

44 Scopus citations

Abstract

We examine how a 16-week cut in potential unemployment insurance (UI) duration in Missouri affected search behavior of UI recipients and the aggregate labor market. Using a regression discontinuity design (RDD), we estimate marginal effects of maximum duration on UI and nonemployment spells of 0.45 and 0.25, respectively. We simulate the unemployment rate implied by the RDD estimates assuming no market-level externalities. The implied response closely approximates the decline in the unemployment rate following the benefit cut, suggesting that, even in a period of high unemployment, the labor market absorbed the influx of workers without crowding out other job seekers.

Original languageEnglish (US)
Pages (from-to)2480-2522
Number of pages43
JournalJournal of Political Economy
Volume126
Issue number6
DOIs
StatePublished - Dec 1 2018

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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