The Effects of Extended Unemployment Benefits: Evidence from a Regression Discontinuity Design

Abstract

This paper uses administrative unemployment insurance (UI) data and an unemployment benefits extension for workers aged 45 or older in Taiwan to estimate the effects of the extended benefits on unemployment duration and reemployment outcomes. Using the regression discontinuity design, we estimate that a 90-day increase in potential duration increases the insured duration by 57 days and the non-employment duration by 41 days. While we do not find wage gains for overall UI recipients around 45 years old, the benefits extension is estimated to increase the reemployment wage for the lower-wage workers who are most likely to exhaust their benefits. Our findings suggest that the liquidity constraints at the exhaustion point might play an important role in the effect of a benefit extension on job match quality.