UI Benefit Generosity and Labor Supply from 2002-2020: Evidence from California UI records
Prof. von Wachter's research examines how labor market conditions and institutions affect the well-being of workers and their families. This includes the analysis of unemployment and job loss on workers’ long-term earnings and health outcomes, as well as the role of unemployment insurance and disability insurance in buffering such shocks.
This talk provides estimates of the effect of unemployment insurance benefits on labor supply outcomes over the business cycle using 20 years of administrative claims, earnings, and employer data from California. A regression kink design exploiting nonlinear benefit schedules provides experimental estimates of behavioral labor supply responses throughout the unemployment spell that are comparable over time. For a given unemployment duration, the behavioral effect of UI benefit levels on labor supply is unchanged over the business cycle from 2002 to 2019. However, due to increased coverage from extensions in benefit durations , the duration elasticity of UI benefits rises during recessions. The behavioral effect during the start of the COVID-19 pandemic is substantially lower at all weeks of the unemployment spell.