During the 2008-2009 recession, U.S. unemployment insurance (UI) benefits were extended to unprecedented levels, with UI duration increasing from 26 weeks—the regular duration—to as much as 99 weeks in some states, prompting a lively debate in policy and academic circles about the adverse effects of such extensions on the search behavior of job seekers and thus on the unemployment and labor force participation rates.
While recent studies have focused on the extension of UI benefits during the recent crisis, the extension of benefits is not specific to the 2008-2009 recession. In fact, the duration of UI benefits was increased in all recessions since the mid-70s.
This paper presents estimates of the effect of emergency and extended unemployment benefits (EEB) on the unemployment rate and the labor force participation rate using a data set containing information on individuals likely eligible and ineligible for EEB back to the late 1970s. To identify these estimates, we examine how exit rates from unemployment change across different points of the distribution of unemployment duration when EEB is and is not available, controlling for changes in labor demand and demographic characteristics.
We find that EEB increased the unemployment rate by about one-third percentage point in the most recent recession but did not affect the participation rate. In previous recessions, the effect of EEB on the unemployment rate was even smaller.
Job Market Monitor 
Discussion
Trackbacks/Pingbacks
Pingback: Unemployment Insurance in US – Cut in benefit duration accounted for about 61 percent of the aggregate employment growth in 2014 NBER’s study finds | Job Market Monitor - January 26, 2015