Spending and Job-Finding Impacts of Expanded Unemployment Benefits: Evidence from Administrative Micro Data
Peter Ganong, Fiona Greig, Pascal Noel, Daniel M. Sullivan, Joseph Vavra
American Economic Review · 2024 · Volume 114 · Issue 9
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.
Keywords
Macroeconomics: Consumption, Saving, Wealth, Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Aggregate Labor Productivity, Business Fluctuations, Cycles, Fiscal Policy, Macro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy, Household Finance: Household Saving, Borrowing, Debt, and Wealth, Unemployment Insurance, Severance Pay, Plant Closings
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