The Macro Effects of Unemployment Benefit Extensions: a Measurement Error Approach*

By how much does an extension of unemployment benefits affect macroeconomic outcomes such as unemployment? Answering this question is challenging because U.S. law extends benefits for states experiencing high unemployment. We use data revisions to decompose the variation in the duration of benefits into the part coming from actual differences in economic conditions and the part coming from measurement error in the real-time data used to determine benefit extensions. Using only the variation coming from measurement error, we find that benefit extensions have a limited influence on state-level macroeconomic outcomes. We apply our estimates to the increase in the duration of benefits during the Great Recession and find that they increased the unemployment rate by at most 0.3 percentage point.

• Publication year

  2018

• Venue

  Quarterly Journal of Economics

• Publication date

  2018-08-20

• Fields of study

  Economics

• Identifiers
  DOI 10.1093/QJE/QJY018
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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