NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Simon Quach

Industrial Relations Section
Louis A. Simpson International Bldg.
Princeton University
Princeton, NJ 08544
Tel: 609-258-5234

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Institutional Affiliation: Princeton University

NBER Working Papers and Publications

February 2019Are Sufficient Statistics Necessary? Nonparametric Measurement of Deadweight Loss from Unemployment Insurance
with David S. Lee, Pauline Leung, Christopher J. O'Leary, Zhuan Pei: w25574
Central to the welfare analysis of income transfer programs is the deadweight loss associated with possible reforms. To aid analytical tractability, its measurement typically requires specifying a simplified model of behavior. We employ a complementary “decomposition” approach that compares the behavioral and mechanical components of a policy’s total impact on the government budget to study the deadweight loss of two unemployment insurance policies. Experimental and quasi-experimental estimates using state administrative data show that increasing the weekly benefit is more efficient (with a fiscal externality of 53 cents per dollar of mechanical transferred income) than reducing the program’s implicit earnings tax.
 
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