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The Importance of Unemployment Insurance as an Automatic Stabilizer

Year: 2016

Type: report

Abstract: We assess the extent to which unemployment insurance (UI) serves as an automatic stabilizer to mitigate the economy's sensitivity to shocks.Using a local labor market design based on heterogeneity in local benefit generosity, we estimate that a one standard deviation increase in generosity attenuates the effect of adverse shocks on employment growth by 7% and on earnings growth by 6%.Consistent with a local demand channel, we find that consumption is less responsive to local labor demand shocks in counties with more generous benefits.Our analysis finds that the local fiscal multiplier of unemployment insurance expenditure is approximately 1.9.

Source: National Bureau of Economic Research

DOI: 10.3386/w22625

Authors: Marco Di Maggio, Amir Kermani

Institutions: National Bureau of Economic Research, Harvard University, Centre for Studies in Economics and Finance, University of California, Berkeley

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, No poverty

Open Access status: green

OpenAlex ID: W3121819355

Cites: 100

Cited by: 57

Related to: 10