American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Spending and Job-Finding Impacts of Expanded Unemployment Benefits: Evidence from Administrative Micro Data
American Economic Review
vol. 114,
no. 9, September 2024
(pp. 2898–2939)
Abstract
We show that the largest increase in unemployment benefits in US history had large spending impacts and small job-finding impacts. This finding has three implications. First, increased benefits were important for explaining aggregate spending dynamics—but not employment dynamics—during the pandemic. Second, benefit expansions allow us to study the MPC of normally low-liquidity households in a high-liquidity state. These households still have high MPCs. This suggests a role for permanent behavioral characteristics, rather than just current liquidity, in driving spending behavior. Third, the mechanisms driving our results imply that temporary benefit supplements are a promising countercyclical tool.Citation
Ganong, Peter, Fiona Greig, Pascal Noel, Daniel M. Sullivan, and Joseph Vavra. 2024. "Spending and Job-Finding Impacts of Expanded Unemployment Benefits: Evidence from Administrative Micro Data." American Economic Review, 114 (9): 2898–2939. DOI: 10.1257/aer.20220973Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- E62 Fiscal Policy
- E71 Macro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- J65 Unemployment Insurance; Severance Pay; Plant Closings