Countercyclical unemployment benefit extensions in the United States act as a propagation mechanism, contributing to … both the high persistence of unemployment and its weak correlation with productivity. We show this by modifying an … otherwise standard frictional model of the labor market to incorporate a stochastic and state-dependent process for unemployment …

We study optimal unemployment insurance (UI) over the business cycle using a heterogeneous agent job search model with …

unemployment benefits in a model with labor market matching, wealth heterogeneity, precautionary savings, and aggregate … fluctuations in productivity. The results are ambiguous: both procyclical and countercyclical unemployment benefi?ts can increase … distortionary effect (on job creation) from providing unemployment insurance, whereas countercyclical benefits facilitate …

The optimal cyclical behavior of unemployment insurance is characterized in an equilibrium search model with risk …-averse workers. Contrary to the current US policy, the path of optimal unemployment benefits is pro-cyclical – positively correlated … with productivity and employment. Furthermore, optimal unemployment benefits react non-monotonically to a productivity …