Arbeitspapier
Whether, When and How to Extend Unemployment Benefits: Theory and Application to COVID-19
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.
- Language
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Englisch
- Bibliographic citation
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Series: IZA Discussion Papers ; No. 14085
- Classification
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Wirtschaft
Unemployment Insurance; Severance Pay; Plant Closings
- Subject
-
unemployment insurance
unemployment
optimal policy
COVID-19
- Event
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Geistige Schöpfung
- (who)
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Mitman, Kurt
Rabinovich, Stanislav
- Event
-
Veröffentlichung
- (who)
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Institute of Labor Economics (IZA)
- (where)
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Bonn
- (when)
-
2021
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Mitman, Kurt
- Rabinovich, Stanislav
- Institute of Labor Economics (IZA)
Time of origin
- 2021
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