Faithin Omaha eBook Collection

Download or read book Assessing the (de)stabilizing Effects of Unemployment Benefit Extensions written by Alexey Gorn and published by . This book was released on 2021 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the stabilizing role of unemployment benefit extensions. We develop a tractable quantitative model with heterogeneous agents, search frictions, and nominal rigidities. The model allows for both a stabilizing aggregate demand channel and a destabilizing labor market channel of unemployment insurance. We characterize analytically the workings of each channel. Stabilizing aggregate demand effects marginally prevail in the U.S. economy and the unprecedented benefit extensions introduced during the Great Recession played a limited role for unemployment dynamics. Instead, unemployment from the model tracks actual unemployment with a combination of labor market shocks and a shock to the consumers' borrowing capacity.