A Quasi-Experimental Approach to the Effects of Unemployment Insurance

This paper uses the natural experiment provided by periodic increases in state benefit levels to estimate the effects of higher unemployment insurance benefits, individuals who filed just before and just after sixteen benefit increases are compared using data from five states during 1979-1984. The increases, which average about 9 percent, are found to increase the period of unemployment insurance receipt by about one week. This effect is precisely estimated and found using several approaches. the incidence of layoffs resulting in unemployment insurance claims is unaffected by the increases. The evidence does not suggest that higher benefits lead to better jobs. In fact, the post-unemployment earnings of individuals receiving higher benefits are estimated to fall slightly, but the estimates are imprecise.