Casey McQuillan

The Benefits of Unemployment Insurance For Marginally Attached Workers Expanding unemployment insurance access improves job quality and earnings with minimal delay in re-employment, especially when paired with employment services.

A link to the full paper here
equitablegrowth.org/working-pape...

A thread with more details here
bsky.app/profile/case...

Making the case for expanding UI eligibility to more workers, based on our recent working paper with @equitablegrowth.bsky.social

See below for the full paper, my website with more research, and my email for comments/questions!

📝: casey-mcquillan.github.io/files/McQuil...
💻: casey-mcquillan.github.io
📧: caseycm@princeton.edu

One takeaway is that raising benefit levels is more expensive than you'd think, but the broader lesson is that incomplete and endogenous take-up is a first-order concern for the optimal design of social insurance.

Also, recall our earlier paper estimated the MVPF for expanding UI access to low-income workers, which suggested this would be a much, much more cost-effective policy.

bsky.app/profile/case...

Existing estimates of the MVPF don’t account for this take-up response, and so they overstate the cost-effectiveness of raising benefits.

If this is the measure we use to decide where to put tax dollars, this difference meaningfully shifts policy priorities.

Combining theory and empirics, we quantify the policy implications. Accounting for endogenous take-up:
- Lowers the optimal benefit level by 27% ($633➡️$451)
- Reduces the marginal value of public funds (MVPF) by 29 percent (0.90➡️0.66)

Optimal policy depends on total benefit payments, whether from higher take-up or longer claims. We already knew that the duration elasticity enters the optimal policy condition, but the insight from this paper is that the take-up elasticity belongs there as well

We develop a model with worker-specific hassle costs, which explains both incomplete take-up and why take-up rises with benefits. We then derive optimal policy in three cases: (1) no behavioral responses, (2) endogenous search only; and (3) endogenous search and take-up

As a benchmark, we consider what happens if we only look at the duration response: a 10% increase in weekly benefit extends avg claim duration by 1.6%. This means the take-up response drives more than two-thirds of the effect on benefit payments, tripling the fiscal externality.

Our results suggest that a 10% increase in weekly benefit would increase take-up by 4.7%, which drives a 6.2% increase in the number of benefit payments

To identify the causal effect, we use a regression kink design (RKD) that exploits non-linearities in the benefits schedule. The intuition is that a kink in benefits should create a kink in the outcome, and we can estimate the effect by comparing the size of these kinks.

We construct a sample of likely-eligible workers using employer-employee matched data, and then match this sample with admin records of claims and benefit payments to determine whether if a worker received benefits and the duration of their claim.

After a job separation, a worker needs to file an initial claim, and then a ``waiting week’’ claim that will not be paid out, and then another claim the following week that can result in payment. We track workers from their job separation through these steps.

We typically think about UI in terms of an insurance-incentive tradeoff: more generous benefits better insure workers against job loss, but also reduce the incentive to find re-employment.

But this overlooks that more generous UI may mean more workers take up in the first place!

When take-up is incomplete, it becomes a potential margin through which workers respond to policy. In fact, one-third of non-claimants cited either benefit levels or hassle costs as a reason for not taking up UI.

UI supports workers after they lose their job and while they look for re-employment. The standard models of UI assume perfect take-up and begin their analysis at benefit receipt.

And this is despite the fact that only half of eligible workers claim benefits in the US!

Three main findings:
1️⃣ 10% increase in weekly benefit ➡️ 4.7% increase in take-up.

2️⃣ This take-up response triples the fiscal externality, versus when we only consider the duration response.

3️⃣ Endogenous take-up lowers the optimal benefit level by 29%.

🚨🚨🚨 MY JOB MARKET PAPER 🚨🚨🚨
"Incomplete and Endogenous Take-Up of Unemployment Insurance Benefits" (with Brendan Moore)

➡️ We study how the generosity of UI benefits affects take-up and the implications for optimal policy.

See below for the full paper, my website with even more research, and my email!

📝: casey-mcquillan.github.io/files/McQuil...

💻: casey-mcquillan.github.io

📧: caseycm@princeton.edu

One takeaway is that raising benefit levels is more expensive than you'd think, but the broader lesson is that incomplete and endogenous take-up is a first-order concern for the optimal design of social insurance.

Also, recall our earlier paper estimated the MVPF for expanding UI access to low-income workers, which suggested this would be a much, much more cost-effective policy.

Different policies may affect take-up very differently.

bsky.app/profile/case...

Thank you for the kind words!

Casey McQuillan: Incomplete and Endogenous Take-Up of Unemployment Insurance. Areas: Labor Economics and Public Finance. Letter Writers: Ilyana Kuziemko (advisor), Dave Lee (advisor), Owen Zidar.

Casey McQuillan’s job market paper studies how unemployment insurance (UI) generosity affects take-up and optimal policy design. esd.wa.gov/media/pdf/42...

Another caveat: There are lots of workers in state and local government who were laid off as the direct result of DOGE cuts as well. I don't think people realize how much of the state and local government is actually federally funded

More than a Safety Net – Value Created by Unemployment Benefits Welfare programs, like unemployment insurance, are rarely mentioned as policies that are positive-sum.

Programs like unemployment insurance, are rarely mentioned as positive-sum (unlike, say trade). But research by Casey McQuillan (@caseymcquillan.bsky.social) and Brendan Moore shows how UI generates value by allowing job-seekers to find better job matches
nominalnews.substack.com/p/unemployme...

Thanks Anna! I appreciate the kind words!

The full paper can be found here:
casey-mcquillan.github.io/files/McQuil...

Lastly, we use the Marginal Value of Public Funds (MVPF) framework to compare the value of expanding UI eligibility against raising benefit levels or extending benefit duration.

We find lowering the eligibility threshold is the most cost-effective UI policy studied to date.