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Discussion Paper
Wage Insurance: A Potential Policy for Displaced Workers
Hyman, Benjamin; Kovak, Brian K.; Leive, Adam (2024-07-17)
Despite the existing safety net, worker displacement continues to have severe consequences that motivate the consideration of new social insurance programs. Wage insurance is a novel policy that temporarily provides additional income to workers who lose their job and become re-employed at a lower wage. In this post, we draw on evidence from our recent working paper analyzing the effects of a U.S. wage insurance program on worker earnings and employment outcomes. Among workers displaced by international trade, we find that eligibility for wage insurance increased the probability of employment ...
Liberty Street Economics , Paper 20240717

Working Paper
The Value of Unemployment Insurance: Liquidity vs. Insurance Value
Liu, Kaixin; Hernandez Martinez, Victor (2022-05-18)
This paper argues that the value of unemployment insurance (UI) can be decomposed into a liquidity component and an insurance component. While the liquidity component captures the value of relieving the cost to access liquidity during unemployment, the insurance component captures the value of protecting the worker against a potential permanent future income loss. We develop a novel sufficient statistics method to identify each component that requires only the labor supply responses to changes in the potential duration of UI and severance payment and implement it using Spanish administrative ...
Working Papers , Paper 22-16

Working Paper
How Should Unemployment Insurance Vary over the Business Cycle?
Birinci, Serdar; See, Kurt (2020-02-18)
We study optimal unemployment insurance (UI) over the business cycle using a heterogeneous agent job search model with aggregate risk and incomplete markets. We validate the model-implied micro and macro labor market elasticities to changes in UI generosity against existing estimates, and provide an explanation for divergent empirical findings. We show that generating the observed demographic differences between UI recipients and non-recipients is critical in determining the magnitudes of these elasticities. We find that the optimal policy features countercyclical replacement rates with ...
Working Papers , Paper 2019-022

Working Paper
Unemployment Insurance during a Pandemic
Fang, Lei; Xie, Zoe; Nie, Jun (2020-07-31)
The CARES Act implemented in response to the COVID-19 crisis dramatically increases the generosity of unemployment insurance (UI) benefits, triggering concerns about its substantial impact on unemployment. This paper combines a labor market search-matching model with the SIR-type infection dynamics to study the effects of CARES UI on both unemployment and infection. More generous UI policies create work disincentives and lead to higher unemployment, but they also reduce infection and save lives. Economic shutdown policies further amplify these effects of UI policies. Quantitatively, the CARES ...
FRB Atlanta Working Paper , Paper 2020-13

Discussion Paper
Who Benefited Most from the CARES Act Unemployment Insurance Provisions?
Fang, Lei; Xie, Zoe; Nie, Jun (2022-04-07)
The regular unemployment insurance (UI) program in the United States requires workers to have a minimum amount of earnings as well as a sufficient work history before unemployment. Low-wage workers are more likely to have a short work history before unemployment because they are more likely to be separated from their jobs. Pandemic Unemployment Assistance (PUA) under the CARES Act temporarily eliminated the requirements for minimum past earnings and length of employment, thus making many low-wage workers who were ineligible for UI under the regular program temporarily eligible. The extra ...
Policy Hub* , Paper 2022-04

Working Paper
Unemployment Insurance during a Pandemic
Nie, Jun; Xie, Zoe (2020-08-06)
The CARES Act implemented in response to the COVID-19 crisis dramatically increased the generosity of unemployment insurance (UI) benefits, triggering concerns about substantial effects on unemployment. This paper combines a labor market search-matching model with the SIR-type infection dynamics to study the effects of the CARES Act UI on both unemployment and infection. More generous UI policies create work disincentives and lead to higher unemployment but also reduce infection and save lives. Economic shutdown policies further amplify these effects of UI policies. Quantitatively, the CARES ...
Research Working Paper , Paper RWP 20-07

Working Paper
Using the Eye of the Storm to Predict the Wave of Covid-19 UI Claims
Seo, Boyoung; Butters, R. Andrew; Aaronson, Daniel; Brave, Scott A.; Sacks, Daniel (2020-04-16)
We leverage an event-study research design focused on the seven costliest hurricanes to hit the US mainland since 2004 to identify the elasticity of unemployment insurance filings with respect to search intensity. Applying our elasticity estimate to the state-level Google Trends indexes for the topic “unemployment,” we show that out-of-sample forecasts made ahead of the official data releases for March 21 and 28 predicted to a large degree the extent of the Covid-19 related surge in the demand for unemployment insurance. In addition, we provide a robust assessment of the uncertainty ...
Working Paper Series , Paper WP-2020-10

Working Paper
Consumer Bankruptcy and Unemployment Insurance
Legal, Diego; Young, Eric (2024-05-07)
We quantitatively evaluate the effects of UI on bankruptcy in an equilibrium model of labor market search and defaultable debt. First, we ask whether a standard unsecured credit model extended with labor market search and matching frictions can account for the negative correlation between UI caps and bankruptcy rates observed in the data. The model can account for this fact only if estimated with the employment rate among bankruptcy filers as a target. Not matching this employment rate underestimates the consumption smoothing benefits of UI cap increases, as the model assigns too much ...
Working Papers , Paper 24-09

Working Paper
A Quantitative Theory of Time-Consistent Unemployment Insurance
Pei, Yun; Xie, Zoe (2016-11-01)
During recessions, the U.S. government substantially increases the duration of unemployment insurance (UI) benefits through multiple extensions. This paper seeks to understand the incentives driving these increases. Because of the trade-off between insurance and job search incentives, the classic time-inconsistency problem arises. During recessions, the U.S. government substantially increases the duration of unemployment insurance (UI) benefits through multiple extensions. This paper seeks to understand the incentives driving these extensions. Because of the trade-off between insurance and ...
FRB Atlanta Working Paper , Paper 2016-11

Working Paper
Labor Market Responses to Unemployment Insurance: The Role of Heterogeneity
Birinci, Serdar; See, Kurt (2021-03)
We document considerable scope of heterogeneity within the unemployed, especially when the unemployed are divided along eligibility and receipt of unemployment insurance (UI). We develop a heterogeneous-agent job-search model capable of matching the wealth and income differences that distinguish UI recipients from non-recipients. Labor market responses to UI changes are non-monotonic in wealth because the poorest individuals exhibit weak responses due to the high value they attribute to employment. Differential elasticities imply that the extent to which structural models account for the ...
Working Papers , Paper 2019-022

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