Working Paper Revision

Optimal Unemployment Insurance Requirements

Abstract: In the US, workers must satisfy two requirements to receive unemployment insurance (UI): a tenure requirement of a minimum work spell and a monetary requirement of past minimum earnings. Using discontinuity of UI rules at state borders, we find that the monetary requirement decreases the number of employers and the share of part-time workers, while the tenure requirement has the opposite effect. In a quantitative model, the monetary requirement induces workers to stay longer in unemployment because low-paying jobs are not covered by UI. Since it mitigates moral hazard, the optimal UI design has a high monetary requirement.

Keywords: Unemployment Insurance; UI Eligibility; Optimal UI;

JEL Classification: E24; E61; J65;

https://doi.org/10.26509/frbc-wp-202210r

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers

Publication Date: 2023-03-06

Number: 22-10R

Related Works

• Working Paper Revision: Optimal Unemployment Insurance Requirements