TY  - RPRT
        AU  - Mitman, Kurt
AU  - Rabinovich, Stanislav
        TI  - Whether, When and How to Extend Unemployment Benefits: Theory and Application to COVID-19
        PY  - 2021/Jan/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 14085
        UR  - https://www.iza.org/index.php/publications/dp14085
        AB  - We investigate the optimal response of unemployment insurance to economic shocks, both with and without commitment. The optimal policy with commitment follows a modified Baily-Chetty formula that accounts for job search responses to future UI benefit changes. As a result, the optimal policy with commitment tends to front-load UI, unlike the optimal discretionary policy. In response to shocks intended to mimic those that induced the COVID-19 recession, we find that a large and transitory increase in UI is optimal; and that a policy rule contingent on the change in unemployment, rather than its level, is a good approximation to the optimal policy.
        KW  - unemployment insurance
KW  - unemployment
KW  - optimal policy
KW  - COVID-19
        ER  -