Did you know?

After Kockerlakota dared suggest there are substantial structural problems in the labor market (right wing scum!), the very next paragraph was:

Given the structural problems in the labor market, I do not expect unemployment to decline rapidly. My own prediction is that unemployment will remain above 8 percent into 2012. Persistently high unemployment of this kind will impose considerable losses on many of our citizens. Good public policy requires that we help mitigate their losses via a well-designed unemployment insurance program. Recent economic research, including some done at the Federal Reserve Bank of Minneapolis, shows that such a program will not feature the termination of benefits after 26, 52, or 99 weeks. Instead, a good insurance program should offer constant benefits over the entire duration of an unemployment spell, however long. It should provide incentives only through the level of those benefits, not through their timing.

and then he cites Shimer/Werning (2008). That paper shows just what Kockerlakota suggests above, i.e. if the unemployed have good access to liquidity (i.e. a part-time job, bridge loans or savings) there should be no cut-off of unemployment benefits (left-wing nut job!).

1 thought on “Did you know?”

  1. So… there’s two policy proposals: bridge loans for the unemployed so they can borrow against future earnings (heck, extend the program to everyone… heck, make this an uber extension of the college loan program) and extend UI benefits to forever, but scale back the benefit level.

    PS – These policies don’t optimize unemployment rates (in fact they might increase unemployment rates), they optimize utility. It should be obvious that these aren’t the same thing.

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