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·May 19, 2025

Remote Work, Employee Mix, and Performance

Cevat Giray Aksoy, Nicholas Bloom, Steven Davis, Victoria Marino, and Cem Özgüzel
Topics: Employment & Wages
BFI Working Paper·May 13, 2025

Meaning at Work

Nava Ashraf, Oriana Bandiera, Virginia Minni, and Luigi Zingales
Topics: Employment & Wages
BFI Working Paper·Apr 23, 2025

Evaluating Recent Crackdowns on Disability Benefits: Effects on Income and Health Care Use in Australia

Manasi Deshpande, Greg Kaplan, and Tobias Leigh-Wood
Topics: Employment & Wages, Health care