WP 15: A fast track for timely unemployment benefits: Impacts on liquidity constrained households from administrative data

Abstract

This study evaluates the effectiveness of a program introduced in Norway during the COVID-19 pandemic that provided the option to apply for advance benefit payments to mitigate the impact of delays in the processing of unemployment insurance (UI) claims. We examine whether access to timely UI transfers effectively targeted the intended groups or instead attracted mainly financially literate households. By combining individual application data, demographic information, imputed consumption, and household balance sheet data, we estimate that the vast majority of financially constrained households avoided temporary consumption shocks through advance payment. According to our estimates, the median constrained applicant avoided consumption postponement of 31 percent, comparable to a household welfare gain of 5 percent, concentrated among single adult households.

Keywords: unemployment insurance, liquidity constraint, consumption smoothing, policy evaluation, COVID-19

JEL codes: E21, I38, J65