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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Fatih Karahan

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October 2013Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects
with Marcus Hagedorn, Iourii Manovskii, Kurt Mitman: w19499
We exploit a policy discontinuity at U.S. state borders to identify the labor market implications of unemployment benefit extensions. In contrast to the existing literature that focused on estimating the effects of benefit duration on job search decisions by the unemployed – the micro effect – we are guided by equilibrium labor market theory and focus on measuring the general equilibrium macro effect that operates through the response of job creation to benefit extensions. We find that it is the latter effect that is very important quantitatively. In particular, benefit extensions raise equilibrium wages and lead to a sharp contraction in vacancy creation, employment, and a rise in unemployment.

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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