Assessing the welfare effects of unemployment benefits using the regression kink design

I show how, in the tradition of the dynamic labor supply literature, one can identify the moral hazard effects and liquidity effects of unemployment insurance (UI ) using variations along the time profile of unemployment benefits. I use this strategy to investigate the anatomy of labor supply responses to UI. I identify the effect of benefit level and potential duration in the regression kink design using kinks in the schedule of benefits in the US. My results suggest that the response of search effort to UI benefits is driven as much by liquidity effects as by moral hazard effects.