DP14158 Individual and Market-Level Effects of UI Policies: Evidence from Missouri

Author(s): Fatih Karahan, Kurt Mitman, Brendan Moore
Publication Date: November 2019
Keyword(s): search, unemployment, Unemployment insurance, Vacancies
JEL(s): E24, J63, J64, J65
Programme Areas: Labour Economics, Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14158

We develop a method to jointly measure the response of worker search effort (individual effect) and vacancy creation (market-level effect) to changes in the duration of unemployment insurance (UI) benefits. To implement this approach, we exploit an unexpected cut in UI durations in Missouri and provide quasi-experimental evidence on the effect of UI on the labor market. The data indicate that the cut in Missouri significantly increased job finding rates by both raising the search effort of unemployed workers and the availability of jobs. The latter accounts for at least a third and up to 100 of the total effect.