Essays on unemployment insurance and the reservation wage
Date
2024
Authors
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Publisher
University of Delaware
Abstract
This dissertation comprises three research papers focusing on the effects of unemployment insurance and labor supply dynamics. In chapter one, I use new government Benefit Accuracy Measurement (BAM) survey data on unemployment insurance (UI) claimants to study the relationships between reservation wages and labor market conditions. The direction of most measures is in accordance with the theory. While the layoffs rate coefficient aligns with the theory, the total separation rate deviates from it, due to the role of quits in the job separation rate. Among the main indicators, workers are most responsive to the employment-to-population ratio. Results also show that the aggregate employment indicators matter more than worker’s group-specific measures, indicating that workers focus more on the aggregate market conditions. To introduce exogeneity, I include shift share measures in my specifications and find similar positive relationships between the reservation wage and the shift share measures. All results are robust to different sub-sample selections and specifications. ☐ In chapter two, I investigate the impact of unemployment insurance extension on labor market outcomes. In August 2020, the US government introduced the Lost Wages Assistance Program, the purpose was to provide relief to the unemployed workers. Under the program, $300 additional payments were provided in addition to regular UI benefits. Using the Household Pulse Survey, this paper attempts to study the moral hazard effect of the program. I find that a 1% increase in the replacement rate due to LWA was associated with a 4% decrease in the probability of working. The effect is similarly significant among the sub-groups as well. ☐ In chapter three, I study the impact of the withdrawal of unemployment insurance extensions on housing outcomes. In June 2021, 23 states decided to end the pandemic-era UI extensions. In this paper, I exploit state level variation to examine the impact of early withdrawal from FPUC (Federal Pandemic Unemployment Compensation) on housing outcomes. In the TWFE specifications, I find a negative impact of the UI extensions on home-owners, with foreclosure rates going up. I find no significant effect on the renters. To address treatment heterogeneity, I include the event study results. My event study findings indicate that the eviction rates go down significantly, foreclosure rates go down in the short run only, and mortgage confidence rises in the post period. These findings imply that the UI termination had a positive impact on the housing market outcomes.
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Keywords
Labor supply dynamics, Replacement rate, Labor market outcomes, Unemployment insurance