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12:30 - 13:40 5 October 2011

The effects of unemployment insurance over the business cycle: evidence from regression discontinuity estimates over twenty years


IFS Conference Room | Institute for Fiscal Studies (link Map)
7 Ridgmount Street | London | WC1E 7AE |

Open to: Academic | Student
Ticketing: Open

Speaker information

Till von Wachter, Columbia University

A goal of extending the duration of unemployment insurance (UI) in recessions is to reduce the rate of benefit exhaustion and hence increase coverage. However, such extensions potentially come at the cost of increased nonemployment durations. If UI benefit durations vary with the business cycle, it is very difficult to estimate the effects of this policy because of reverse causality. In this paper, we exploit the fact that the duration of UI benefits in Germany is a function of exact age that is invariant over the cycle. Using the universe of unemployment spells and career histories we implement a regression discontinuity design separately for twenty years and across industries and correlate our estimates with measures of the business cycle. The nonemployment effects of UI extensions we find are at best somewhat declining in large recessions. Yet, the UI exhaustion rate, and therefore the additional coverage provided by UI extensions, rises substantially during a downturn.


Institute for Fiscal Studies
020 7291 4800 |


Seminar paper