Labor Economics 5th Edition by George Borjas

Exercise 13

During the debate over a federal spending bill, Senator A proposed changing the schedule for paying out unemployment benefits to be one where benefits were doubled, but offered for half the current duration (so that UI benefits would expire after 13 weeks). In contrast, Senator B proposed cutting UI benefits in half but to pay benefits for twice as long (so that UI benefits would not expire until after 52 weeks). Comparing to the status quo, contrast both plans along the following dimensions: overall unemployment rate, average duration of unemployment spells, and the distribution of wages accepted by workers coming out of a spell of unemployment.