Working Paper

The Effect of Unemployment Insurance Eligibility in Equilibrium

Abstract: In the United States, workers whose past earnings were below a threshold are generally ineligible for unemployment insurance (UI), creating a discontinuous jump in the value of being unemployed. Using a regression discontinuity design with administrative panel data, we estimate a sizable local effect from UI eligibility on earnings in the next employer, around 10 percent per quarter. This evidence, however, understates UI’s causal effect because of endogenous non-compliance. It also does not distinguish between underlying reasons for higher re-employment earnings, a higher share of production, or more productive matches. These are addressed through a quantitative model. The underlying causal effect is 50 percent higher than the empirical estimates, and nearly all of the effect comes from workers getting a larger share.

JEL Classification: E24; E30; J62; J63; J64;

https://doi.org/10.29338/wp2025-06

Status: Published in 2025

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 2025-07-14

Number: 2025-6