The Effect of Extended Unemployment Insurance Benefits: Evidence from the 2012-2013 Phase-Out

The duration of U.S. Unemployment Insurance (UI) benefits was expanded to an unprecedented degree in the Great Recession, reaching a maximum of 99 weeks in many states by 2010. These expansions were then rolled back in 2012 and 2013. Since January 2014, no state has had UI benefits available beyond the normal duration (26 weeks in most states). Unemployment insurance extensions may raise measured unemployment, both by reducing the incentive for recipients to find jobs quickly and by bolstering the incentive to engage in and report active job search. But the relative magnitude of these effects is uncertain and may vary with economic conditions. In earlier work, we examined the effects of the 2008-2011 expansions, relying on cross-state and temporal variation in the duration of available UI benefits (Rothstein 2011; Farber and Valletta 2015). We found that benefit extensions slightly reduced the exit rate from unemployment, largely through increased labor force attachment rather than reduced job finding. These estimates may be affected by the historically weak labor market conditions around the Great Recession, however, and they may not generalize to changes in UI durations under more favorable labor market conditions. In this study, we update our earlier anal-