Do Unemployment Insurance Benefits Improve Match Quality? Evidence from Recent U.S. Recessions
We present new evidence on the impact of more generous unemployment insurance (UI) on workers’ ability to find jobs better suited to their skills. Using Longitudinal Employer-Household Dynamics data, we find the UI extensions introduced in the U.S. improved the quality of worker-job matches. Using Current Population Survey data, we also find that longer UI benefit durations decrease the mismatch between workers’ educational attainments and the educational requirements of jobs. We find bigger effects of UI on match quality for those more likely to be liquidity constrained—women, non-whites and less-educated workers—,suggesting UI extensions improve the functioning of the labor market.
This research uses restricted microdata from the U.S. Census Bureau’s Longitudinal Employer Household Dynamics (LEHD) Program, which was partially supported by the following National Science Foundation Grants SES-9978093, SES-0339191 and ITR-0427889; National Institute on Aging Grant AG018854; and grants from the Alfred P. Sloan Foundation. All results have been reviewed to ensure that no confidential data are disclosed. All results have been approved by the Disclosure Review Board. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau. This research was performed at the Georgetown Federal Statistical Research Data Center under FSRDC Project Number 1812. All errors are our own. We acknowledge the generous financial support from the Washington Center for Equitable Growth. We would like to thank George Akerlof, Joe Altonji, Heather Boushey, David Card, Raj Chetty, Larry Kahn, Kory Kroft, Jesse Rothstein, and Emmanuel Saez for comments on this paper, and especially Matt Notowidigdo for his thoughtful suggestions and Henry Hyatt for advise on the use of the algorithm to measure AKM and use of LEHD data. Adriana Kugler is the corresponding author. The views expressed herein are those of the authors and do not necessarily reflect those of their employers nor of the National Bureau of Economic Research.