In January 2011, I questioned whether paying able-bodied people to stay home and play Xbox for 99 weeks was a smart idea. In January 2013, I wrote about academic studies that found that indeed the American economy’s recent period of high unemployment and high long-term unemployment was closely tied to our politicians’ decision to pay people to stay home. Last night a reader sent me a link to an October 2013 paper: “Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects,” by economists from the University of Oslo, the Federal Reserve Bank of New York, and the University of Pennsylvania. The authors look at integrated labor markets that happen to be intersected by a state border. In markets, there are workers who have the same job opportunities but potentially different maximum duration for unemployment benefits.
The conclusion? “We found that unemployment benefit extensions have a large effect on total unemployment. In particular, our estimates imply that unemployment benefit extensions can account for most of the persistently high unemployment after the Great Recession.”