Whether, when and how to extend unemployment benefits: Theory and application to COVID-19

A-Tier
Journal: Journal of Public Economics
Year: 2021
Volume: 200
Issue: C

Authors (2)

Mitman, Kurt (Centre for Economic Policy Res...) Rabinovich, Stanislav (not in RePEc)

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We investigate the optimal response of unemployment insurance to economic shocks, both with and without commitment. The optimal policy with commitment follows a modified Baily-Chetty formula that accounts for job search responses to future UI benefit changes. As a result, the optimal policy with commitment tends to front-load UI, unlike the optimal discretionary policy. In response to shocks intended to mimic those that induced the COVID-19 recession, we find that a large and transitory increase in UI is optimal; and that a policy rule contingent on the change in unemployment, rather than its level, is a good approximation to the optimal policy.

Technical Details

RePEc Handle
repec:eee:pubeco:v:200:y:2021:i:c:s0047272721000839
Journal Field
Public
Author Count
2
Added to Database
2026-01-26