This paper investigates how the generosity of unemployment insurance (UI) affects take-up and optimal policy design. Standard models of UI begin their analysis with benefit receipt, yet take-up is highly incomplete: only around half of eligible workers claim benefits in the United States. We develop a model with incomplete take-up explained by the hassle of applying. More generous benefits induce workers on the margin to claim benefits, creating a fiscal externality without providing additional insurance value. Our optimal policy condition extends the Baily-Chetty formula to include the take-up elasticity, which proves quantitatively important. Using administrative data from Washington State and a regression kink design (RKD), we find that a 10 percent increase in the weekly benefit increases take-up by 4.7 percent, which drives a 6.2 percent increase in the number of benefit payments. Previous work considers only the duration elasticity by conditioning on benefit receipt, ignoring the take-up response and thus underestimating the fiscal cost. Combining our theory and empirical results, we show that endogenous take-up reduces the optimal benefit level by 29 percent and the cost-effectiveness of raising benefits by 27 percent. Together, these results highlight that incomplete and endogenous take-up is a first-order consideration in the optimal design of social insurance.

Existing research consistently finds that unemployment insurance (UI) benefits delay job finding with limited effects on job quality, but focuses on changes in UI generosity while holding fixed access to re-employment services. Using employer-employee matched data from Washington State and a fuzzy regression discontinuity design around the eligibility threshold for UI, we find that benefit receipt minimally delays re-employment but substantially improves labor market outcomes. UI increases cumulative hours worked by approximately 15 full-time weeks and earnings by \$14,000 in the two years following job loss, representing 37 percent and 50 percent increases, respectively. These gains are driven by improved job quality, as recipients experience longer tenure and higher wages with their next employer. Effects are larger for workers living near public employment offices, suggesting that access to re-employment services enhances search productivity. Expanding UI access by lowering the eligibility threshold is much more cost-effective than raising benefit levels or extending potential duration, as workers benefit from more stable, higher-paying re-employment that partially offsets its cost.

Unemployment insurance (UI) take-up is relatively low in the United States. We implement a large-scale field experiment among 50,000 likely unemployed individuals to study the causes and labor supply implications of incomplete UI take-up. Informational letters increased applications and receipt, with effects concentrated among low-wage workers. Rejection rates among treated applicants also increased: this suggests that the letters primarily reduced learning costs rather than improved eligibility beliefs. Randomized messages aimed at reducing free-rider stigma induced more applications, primarily among high-wage job seekers. Although prior work finds that more generous UI slows job finding, our take-up intervention modestly increased reemployment, as work-search requirements hastened job finding among recipients but also screened out applicants who were unwilling or unable to verify their search. We develop and estimate a structural job search model calibrated to the reduced form-experimental results to quantify these frictions and show that lower search-compliance costs yield the largest welfare gains for unemployed workers.

Over half of the U.S. population receives health insurance through an employer, with employer premium contributions creating a flat “head tax” per worker, independent of their earnings. This paper develops and calibrates a stylized model of the labor market to explore how this uniquely American approach to financing health insurance contributes to labor market inequality. We consider a partial-equilibrium counterfactual in which employer-provided health insurance is instead financed by a statutory payroll tax on firms. We find that, under this counterfactual financing, in 2019 the college wage premium would have been 11 percent lower, non-college annual earnings would have been $1,700 (3 percent) higher, and non-college employment would have been nearly 500,000 higher. These calibrated labor market effects of switching from head-tax to payroll-tax financing are in the same ballpark as estimates of the impact of other leading drivers of labor market inequality, including changes in outsourcing, robot adoption, rising trade, unionization, and the real minimum wage. We also consider a separate partial-equilibrium counterfactual in which the current head-tax financing is maintained, but 2019 U.S. health care spending as a share of GDP is reduced to the Canadian share; here, we estimate that the 2019 college wage premium would have been 5 percent lower and non-college annual earnings would have been 5 percent higher. These findings suggest that health care costs and the financing of health insurance warrant greater attention in both public policy and research on U.S. labor market inequality.