Chicago Fed estimates that unemployment insurance increased unemployment during the recession

A copy of the study is available here.

In summary, the base case and alternative estimates using the approach outlined in this article suggest that the extension of unemployment insurance benefits during the recent economic downturn can account for somewhere in the neighborhood of 1 percentage point of the increase in the unemployment rate, with a preferred estimate of 0.8 percentage points. . . .

Another study from the Fed estimates how much of the decline in unemployment is due to people exhausting their unemployment benefits. That study is available here.

We use real-time microdata from the Bureau of Labor Statistics’ Current Population Survey (CPS) to examine whether there has been a reverse effect recently as benefits have been exhausted. We find that if UI benefits had lasted indefinitely, the unemployment rate would have been cumulatively about 0.1 to 0.3 percentage points higher between October 2009 and January 2011, which represents about 10% to 25% of the decline in the actual rate over that period. . . .

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