How does the generosity of unemployment insurance (UI) benefits impact unemployment durations? This is a long-standing question in labor economics. UI benefits provide unemployed workers resources to search for a new job, but making UI benefits too generous increases the value of leisure and may induce workers to prolong unemployment. Therefore, measuring the precise magnitude of this disincentive effect of UI benefits is of substantial policy interest, but the evidence is lacking for the past decade in the United States.

In a recent study coauthored with David Card, Andrew Johnston, Pauline Leung and Alex Mas, Professor Zhuan Pei fills this gap by applying a regression kink design (see Card, Lee, Pei and Weber (2015) for details) to administrative data from Missouri between 2003 and 2013. Professor Pei finds that UI claim durations are more responsive to benefit levels during and after the Great Recession (2008-2013) than before (2003-2007). In particular, a 1% increase in the UI benefit level prolongs UI claim durations by 0.65-0.9% post-recession, as compared to about 0.35% pre-recession.


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