unemployment duration

Abstract

In response to the Great Recession and sustained labor market downturn, the availability of unemployment insurance (UI) benefits was extended to new historical highs in the United States, up to 99 weeks as of late 2009 into 2012. We exploit variation in the timing and size of UI benefit extensions across states to estimate the overall impact of these extensions onunemployment duration, comparing the experience with the prior extension of benefits (up to 72 weeks) during the much milder downturn in the early 2000s. Using monthly matched individual data from the U.S. Current Population Survey(CPS) for the periods 2000-2005 and 2007-2012, we estimate the effects of UI extensions on unemployment transitions and duration. We rely on individual variation in benefit availability based on the duration of unemployment spells and the length of UI benefits available in the state and month,conditional on state economic conditions and individual characteristics. We find a small
but statistically significant reduction in the unemployment exit rate and a small increase in the expected duration of unemployment arising from both sets of UI extensions. The effect on exits and duration is primarily due to a reduction in exits from the labor force rather than a decrease in exits to employment (the job ending rate). The magnitude of the overall effect on exits and duration is similar across the two episodes of benefit extensions.
Although the overall effect of UI extensions on exits from unemployment is small, it implies a substantial effect of extended benefits on the steady-state share of unemployment in the cross-section that is long-term.

Year of Publication
2013
Number
573
Date Published
04/2013
Publication Language
eng
Citation Key
8839
Farber, H. ., & Valletta, R. . (2013). Do Extended Unemployment Benefits Lengthen Unemployment Spells? Evidence from Recent Cycles in the U.S. Labor Market. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01th83kz40p (Original work published April 2013)
Working Papers
Abstract

A model of unemployment duration is estimated with weekly micro
data on a sample of Canadian men during the 1975 through 1980 period.
Entitlement provisions in the unemployment insurance program and demand
conditions are found to have a significant impact on the probability of
leaving unemployment. The probability of a worker leaving unemployment
declines with duration of unemployment, holding unemployment insurance
entitlement constant. When entitlement is allowed to vary, the probability of leaving first falls and then generally rises with unemployment
duration as the declining entitlement induces a greater willingness to
accept offers or search more intensively. These results are robust to
alternative specifications of duration dependence and to allowing for
person—specific unobserved heterogeneity.

Year of Publication
1986
Number
212
Date Published
08/1986
Publication Language
eng
Citation Key
Journal of Labor Economics, Vol. 5, No. 3, July, 1987
Ham, J. ., & Rea, S. . (1986). Unemployment Insurance and Male Unemployment Duration in Canada. Retrieved from http://arks.princeton.edu/ark:/88435/dsp011c18df77g (Original work published August 1986)
Working Papers