Unemployment insurance benefits and firms- profitability - the impact of labor productivity

Abstract

This paper analyzes the effects of unemployment insurance benefits on firms’ profitability and the impact of labor productivity changes in this relation. Using panel regression analysis with data from heterogeneous firms across multiple industries and US states, we find that there is no statistically significant relation between unemployment subsidies and firms’ profitability, except when we narrow our analysis to specific industries or dimensions. Additionally, our findings suggest that higher unemployment benefits lead to increased labor productivity in firms.