Unemployment insurance benefit levels and consumption charges
We use a Canadian survey of the unemployed to examine how household expenditures after a job loss respond to the level of income replacement provided by UI. We isolate a liquidity constraint or ‘transitory income’ effect from the ‘permanent income’ shock of job loss, and from the costs of working. We find significant effects of varying the replacement ratio among the third of the sample of who did not have assets at the job loss. We conclude that the consumption smoothing benefit of UI is...[Show more]
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