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Spending and Job-Finding Impacts of Expanded Unemployment Benefits: Evidence from Administrative Micro Data

By: Contributor(s): Material type: Continuing resourceContinuing resourcePublication details: American Economic Review; 2024Description: 2898-2939ISSN:
  • 0002-8282
Subject(s): Online resources: Summary: 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.
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Article Index Article Index Dr VKRV Rao Library Vol. 114, No. 9 Not for loan AI796

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.

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