Spillover Effects Between the Insured and Uninsured Unemployed

TLDR: In this article, the effect of changing the level of unemployment insurance (UI) benefits on workers who do not receive UI was investigated and it was shown that an increase in UI benefits leads to a reduction in the duration of unemployment for uninsured workers.

Abstract: In this paper, I consider the effect of changing the level of unemployment insurance (UI) benefits on workers who do not receive UI. I hypothesize that a spillover effect between insured and uninsured workers exists so that an increase in the UI benefits, which leads to longer durations of unemployment for insured workers, will lead to a reduction in the duration of unemployment for the uninsured. This prediction is tested using data from several March Current Population Surveys and the National Longitudinal Survey of Youth. In both samples I find that an increase in UI benefits leads to a reduction in the duration of unemployment for uninsured workers. Furthermore, using several years of state level data, I show that the estimated effect on unemployment for the entire labor force is roughly zero when I allow for the spillover effect.