NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut

Andrew C. Johnston, Alexandre Mas

NBER Working Paper No. 22411
Issued in July 2016
NBER Program(s):Economic Fluctuations and Growth, Labor Studies, Public Economics

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 a marginal effect of maximum duration on UI and nonemployment spells of approximately 0.5 and 0.3 respectively. We use RDD estimates to simulate the unemployment rate assuming no market-level externalities. The simulated response closely approximates the estimated change in the unemployment rate following the benefit cut, suggesting that even in a period of high unemployment the labor market absorbed this influx of workers without crowding-out other jobseekers.

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Document Object Identifier (DOI): 10.3386/w22411

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