This paper presents a framework for analyzing the relation of unemployment insurance to unemployment and applies the framework to evaluate recent developments in the UI literature and future research needs. Unemployment is decomposed into more basic elements related to the labor market flows which determine unemployment incidence and duration. It is also disaggregated by reason for unemployment -- e.g., entry into the labor force or quit last job. A matrix containing those definitional elements of unemployment which are potentially affected by the UI system forms the basis for organizing the discussion. Each component of unemployment which may be affected by variations in characteristics of the UI system is considered in turn. The discussion of each of these elements focuses on recent theoretical arid empirical studies which analyze how they are influenced by features of the UI system. By proceeding systematically through the elements which comprise unemployment and considering the major behavioral explanations linking the unemployment insurance system to unemployment, it is possible to determine where the analysis has proceeded satisfactorily and where major gaps remain

I use three decades of county-level data to estimate the effects of federal unemployment benefit extensions on economic activity. To overcome the reverse causality coming from the fact that benefit extensions are a function of state unemployment rates, I only use the within-state variation in outcomes to identify treatment effects. Identification rests on a differences-in-differences approach which exploits heterogeneity in county exposure to policy changes. To distinguish demand and supply-side channels, I estimate the model separately for tradable and non-tradable sectors. Finally I use benefit extensions as an instrument to estimate local fiscal multipliers of unemployment benefit transfers. I find (i) that the overall impact of benefit extensions on activity is positive, pointing to strong demand effects; (ii) that, even in tradable sectors, there are no negative supply-side effects from work disincentives; and (iii) a fiscal multiplier estimate of 1.92, similar to estimates in the literature for other types of spending.