A Quantitative Comparison of Unemployment Benefit Extension and Level Increase

We use mean-field game theory to quantitatively compare two unemployment insurance (UI) extension policies commonly used during recessions: raising benefit levels versus extending the duration of benefits. Our heterogenous-agent model features costly job search and individual savings. Our calibrated model matches the savings distribution observed in the U.S. After requiring that the two UI policies have the same cost, we find: (1) a large, one-time lumpsum payment results in lower unemployment rates relative to a moderate, long-lived increase in benefits and (2) both policies deliver approximately the same ex-ante expected utility to unemployed individuals