Working Paper

Delayed Collection of Unemployment Insurance in Recessions

Abstract: Using variations in unemployment insurance policies over time and across U.S. states, this paper provides evidence that allowing unemployed workers to delay the collection of benefits increases their job-finding rate. In a model with discrete job take-up decisions, benefit entitlement, wage-indexed benefits, and heterogeneous job types, I demonstrate that the policy can increase an unemployed worker's willingness to work, even though more benefits in general reduce the relative value of employment. In a calibrated quantitative model, I find that allowing delayed benefit collection increases the overall job finding rates and may lower the unemployment rate both in a steady state stationary economy and over a transition path during 2008?12.

Keywords: health; frailty index; life cycle profiles;

JEL Classification: E24; J65;

https://doi.org/10.29338/wp2019-14

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 2019-06-01

Number: 2019-14

Pages: 52 pages