We show that the largest increase in unemployment benefits in U.S. history had large spending impacts and small job-finding impacts. This finding has three implications. First, increased benefits were important for explaining aggregate spending dynamics—but not employment dynamics—during the pandemic. Second, benefit expansions allow us to study the MPC of normally low liquidity households in a high-liquidity state. These households still have high MPCs. This suggests a role for permanent behavioral characteristics, rather than just current liquidity, in driving spending behavior. Third, the mechanisms driving our results imply that temporary benefit supplements are a promising countercyclical tool.

More on this topic

BFI Working Paper·Jun 30, 2026

The Effect of Reminders for Self-Set Goals on Productivity

Martin Abel, Tomoko Harigaya, Michael Kremer, and Jessica Zhu
Topics: Development Economics, Employment & Wages
BFI Working Paper·Jun 10, 2026

The Enjoyment Paradox: College-Educated Mothers Invest More in Their Children’s Learning and Enjoy It Less

Ariel Kalil, Haoxuan Liu, and Ritika Sethi
Topics: Early Childhood Education, Employment & Wages, Higher Education & Workforce Training
BFI Working Paper·May 28, 2026

Explaining the Historical Rise and Recent Decline in Social Security Disability Insurance Enrollment

Manasi Deshpande, Maxwell Kellogg, Magne Mogstad, and Kuan-Ju Tseng
Topics: Employment & Wages