Key phrase buried in the Appendix to the Badger Institute‘s study entitled: “Unemployment (Over)compensation: How the federal supplemental unemployment benefits impacted unemployment during the pandemic” (April 2022).
From the executive summary:
Our analysis found that the supplemental unemployment insurance (UI) benefit did appear to delay people returning to work, and we estimate that unemployment was 3% to 6% higher because of the federal supplement in the states that kept it in place until September 2021, which translates to an unemployment rate of 0.2 to 0.3 percentage points higher. If Wisconsin had opted out of the supplement in June, the total unemployment would have dropped faster than it did. By September, we estimate, there would have been about 28,000 fewer unemployed.
The authors of this report (h/t Erik Gunn) find this result by exploiting the differences in timing for ending the supplemental unemployment insurance benefit.
In general the econometrics are fairly well executed. The authors control for economic growth (although they don’t define the variable), time trend, labor force participation.
However, they don’t control of public health measures. Moreover, from a statistical standpoint, the inclusion endogenous variables like labor force participation which arguably is also affected by early termination of enhanced unemployment insurance.
But, from my standpoint, the central issue is that it is problematic to make policy conclusions on the basis of a crucial parameter estimate that is not statistically significant at conventional levels (whether we should use a lower significance level for policy analysis is a legitimate topic of debate).