Studies in this week Gathering of Hutchins note that unemployment insurance claims have remained high due to policy changes increasing their attractiveness during the pandemic, workers reducing their earnings when there is an increase in their unearned earnings, and more.

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Brendan Price of the Federal Reserve Board finds Unemployment Insurance (UI) claims have remained high despite the economic recovery from the COVID-19 pandemic, largely due to expanded eligibility and generosity from the program. For example, the Unemployment Pandemic Assistance Program (PUA) has expanded eligibility for benefits to many people who are not traditionally eligible for unemployment insurance, including the self-employed, newcomers in the labor market and workers without a history of sufficient income. In many states, PUA assistance depended first on denial of regular UI, meaning that many non-traditional UI recipients are counted in both regular and PUA initial claims. The author believes that, in the absence of the PUA program, initial UI claims for regular UI benefits would have been 20% lower from mid-2020 to early 2021. Other institutional factors, such as additional benefits of $ 300 / week ($ 600 / week at the onset of the pandemic) and the waiver of job search requirements by many states, have increased incentives to apply. unemployment insurance. “As the institutional landscape returns to pre-pandemic norms, policy measures unique to the pandemic are expected to have a decreasing impact on reported claims,” ​​the author concludes.

Using administrative data on American lottery winners between 1999 and 2016, Michael Graber of the University of Chicago and his coauthors study how exogenous changes in unearned income affect American workers. By comparing workers before and after winning the state lottery, the authors find that, on average, a $ 1 increase in unearned income over a period of time is associated with a 50-cent decrease in pre-tax income, a 10-cent decrease in income tax collection, and an increase of 60 cents of consumption. The effect on earnings is greater for workers with higher earnings before the lottery, they find. These estimated income effects are larger than those in recent literature based on Swedish administrative data, leading the authors to caution “against using wealth effect estimates from countries other than states. – United as inputs for models that are otherwise calibrated or estimated using US data. . ”

Using data on the prices of vacant land purchased for single-family home development, Joseph Gyourko of the University of Pennsylvania and Jacob Krimmel of the Federal Reserve Board estimate the “zoning tax” – the mark-up in house prices owed. zoning regulations that restrict land use — in 24 major metropolitan areas across the United States. Consistent with previous findings, the authors estimate that zoning taxes are higher in large coastal markets than in domestic US markets.. For a quarter acre lot, zoning taxes are around $ 400,000 in the San Francisco area and between $ 150,000 and $ 200,000 in Los Angeles, New York and Seattle. The zoning tax in Chicago, Washington and Boston is smaller. In contrast, zoning has little effect on land prices in a wide range of other markets spread across the interior of the country. In major West Coast markets, the zoning tax tends to be high in all metropolitan areas; on the other hand, in the markets of the east coast, the zoning tax decreases with the distance from the central core. These zoning tax estimates are large enough to play an important role in explaining the geographic variation in house prices, according to the authors.

Chart of the week: U.S. debt-to-GDP ratio set to reach historic highs over the next decade, but not as high as previously expected despite the $ 1.9 trillion budget plan adopted in March

“I would like the unraveling to start. I would like that to happen as soon as possible. I wish it was a slow, orderly process, where we don’t surprise the markets, and we just do it in a way that, you know, is simple… Why did we start asset purchases again during the pandemic ? It was really for two reasons. One was monetary accommodation. But the other was to make the markets work. And I think the reason for the market function was really important ”, says Patrick Harker, president of the Philadelphia Fed.

“The markets are functioning now, essentially. This reason therefore began to fade. Now we can start thinking, do we need the accommodation? And is the tool the right tool for the situation we are facing? As you know, this is not your normal recession. This is caused by a pandemic. And it is supply constraints, not lack of demand, that are the problem. So in my mind to continue a lot of accommodation for a long period of time, I don’t see how that fixes this problem. Having said that, I don’t want to take it off too quickly because I don’t want us to be the cause of the economy not reaching the kind of potential we’re talking about, the kind of healing we’re talking about in our. provide.”