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The expiration of the temporary $600 boost to weekly UI benefits under the Federal Pandemic Unemployment Compensation (FPUC) led to a sharp, unprecedented, 98 percentage point reduction (on average) in the replacement rate during a time when employment was recovering during the Covid recession. Leveraging the considerable variation in this drop across states, I use a difference-in-differences event study design to estimate the macro employment effects. I find little impact of job gains from the benefit reduction, especially when I focus on groups (non-college graduates, and those from non-high-income households) that comprise of most UI recipients. The estimates rule out job gains implied by much of the micro UI duration elasticities from the existing literature.

national bureau of economic research

Aggregate Employment Effects of Unemployment Benefits During Deep Downturns: Evidence from the Expiration of the Federal Pandemic Unemployment Compensation