Unemployment Insurance and Worker Mobility

Technical Paper

Unemployment Insurance and Worker Mobility

Abstract

Unemployment insurance (UI) helps workers to smooth their consumption after employment loss, but also diminishes their incentive to quickly find new jobs. While both of these considerations have been extensively studied, little or no attention has been paid to possible implications of UI for worker migration. In principle, UI could either reduce or increase worker interstate mobility. If recipients are sufficiently discouraged from seeking re-employment, migration would diminish as workers became less likely to move in search of new jobs. On the other hand, if UI allows recipients to conduct a more ambitious job search, it could lead to more migration and better matches between workers and firms, with important implications for labor productivity. Our analysis provides preliminary evidence that the latter occurs. Moreover, a provision of U.S. extended benefits that penalizes some interstate moves appears to have a small negative effect on worker migration.

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