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Working Paper

Optimal Unemployment Insurance Requirements


Abstract: In the U.S., workers must satisfy two requirements to receive unemployment insurance (UI): a tenure requirement of a minimum work spell and a monetary requirement of a 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 induce workers to search longer 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;

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Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2022-04-01

Number: WP 2022-45