Search Results
Working Paper
Optimal Unemployment Insurance Requirements
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 ...
Working Paper
How Should Unemployment Insurance Vary over the Business Cycle?
We study optimal unemployment insurance (UI) over the business cycle using a tractable heterogeneous agent job that features labor productivity driven business cycles and incomplete asset markets, and find that UI policy should be countercyclical. In this framework, besides providing consumption insurance upon job loss, generous UI payments allow individuals to maintain similar consumption levels even during recessions, when they would otherwise have had to accumulate savings by reducing consumption.Moreover, the presence of borrowing constrains disciplines the unemployed's job search ...
Expected U.S. Macroeconomic Performance during the Pandemic Adjustment Period
St. Louis Fed President James Bullard recommends declaring a “National Pandemic Adjustment Period” and discusses three broad goals of macroeconomic policy during this period.
Working Paper
Labor Market Responses to Unemployment Insurance: The Role of Heterogeneity
We document considerable scope of heterogeneity within the unemployed, especially when the unemployed are divided along eligibility and receipt of unemployment insurance (UI). We develop a heterogeneous-agent job-search model capable of matching the wealth and income differences that distinguish UI recipients from non-recipients. Labor market responses to UI changes are non-monotonic in wealth because the poorest individuals exhibit weak responses due to the high value they attribute to employment. Differential elasticities imply that the extent to which structural models account for the ...
Working Paper
Labor Market Responses to Unemployment Insurance: The Role of Heterogeneity
We document considerable scope of heterogeneity within the unemployed, especially when the unemployed are divided along eligibility and receipt of unemployment insurance (UI). We study the implications of this heterogeneity on UI’s insurance-incentive trade-off using a heterogeneous-agent job-search model capable of matching the wealth and income differences that distinguish UI recipients from non-recipients. Insurance benefits are larger for UI recipients who are predominantly wealth-poor. Meanwhile, incentive costs are nonmonotonic in wealth because the poorest individuals, who value ...
Working Paper
Designing Unemployment Insurance for Developing Countries
The high incidence of informality in the labor markets of middle-income economies challenges the provision of unemployment protection. We show that, despite informational frictions, introducing an unemployment insurance savings account (UISA) system may provide substantial benefits. This system improves welfare by providing insurance to the unemployed and creating incentives to work in the formal sector. The optimal scheme generates a reduction in unemployment (from 4 to 3 percent), an increase in formality (from 68 to 72 percent), and a rise in total output (by 4 percent). Overall, ...
Working Paper
Optimal Unemployment Insurance Requirements
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 ...
Journal Article
Federal Enhancements to Unemployment Insurance Supported Tenth District Incomes in 2020
Federal supplements to state unemployment insurance mitigated income losses from COVID-19-related disruptions across the country. In the Tenth Federal Reserve District, many workers who lost jobs had their wages at least fully replaced by federally supported unemployment insurance. In some district states, total income—the sum of unemployment benefits and wages earned from employment—exceeded levels that might have been observed in the absence of the pandemic.
Working Paper
Labor Market Responses to Unemployment Insurance: The Role of Heterogeneity
We document considerable scope of heterogeneity within the unemployed, especially when the unemployed are divided along eligibility and receipt of unemployment insurance (UI). We study the implications of this heterogeneity on UI’s insurance-incentive trade-off using a heterogeneous-agent job-search model capable of matching the wealth and income differences that distinguish UI recipients from non-recipients. Insurance benefits are larger for UI recipients who are predominantly wealth-poor. Meanwhile, incentive costs are nonmonotonic in wealth because the poorest individuals, who value ...