Lessons from the U.S. Unemployment Insurance Experiments

TLDR

Recent experiments have evaluated reemployment bonuses and job search programs as reforms to the unemployment insurance system, testing several promising variations. The studies show that economic incentives shorten UI receipt and give weak evidence that earlier return to work does not reduce earnings, but a permanent bonus program is not favored because its effect on claimant numbers is ignored; most service and enforcement combinations cut UI receipt and have favorable cost/benefit analyses, with earnings tending to rise though estimates are imprecise.

Abstract

Recent social experiments have evaluated two reforms of the unemployment insurance (UI) system: reemployment bonuses and job search programs. The bonus experiments show that economic incentives affect the length of UI receipt and provide weak evidence that an earlier return to work does not decrease earnings. The experiments do not show the favorability of a permanent bonus program as they ignore its effect on the number of the claimants. The job search experiments test several more promising reforms. Nearly all of the combinations of services and increased enforcement reduce UI receipt and have favorable cost/benefit analyses. Earnings often increase, though the estimates are imprecise.