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.
File(s): File format is application/pdf https://www.chicagofed.org/-/media/publications/working-papers/2022/wp2022-45-pdf.pdf?sc_lang=en
Provider: Federal Reserve Bank of Chicago
Part of Series: Working Paper Series
Publication Date: 2022-04-01
Number: WP 2022-45