Ioana Marinescu, 01 March 2016

During the last recession the US experienced some of the highest unemployment rates in its history, prompting the government to dramatically extend the duration of unemployment benefits. Economists have since debated whether this action helped or hindered the recovery of the labour market. This column finds evidence of a ‘silver lining’ effect – extended unemployment benefits led people to submit fewer job applications, but this reduction increased the chances of each application being successful. Hence the overall impact of extending benefits on aggregate unemployment was rather small.