The Impact of Unemployment Insurance on Job Search

Stephen T. Marston

STM

Stephen T. Marston The Brookings Institution

Discussants: Dr. Martin Feldstein,

DMF

Dr. Martin Feldstein President and CEO, National Bureau of Economic Research

Robert E. Hall, and

Robert E. Hall Robert and Carole McNeil Joint Hoover Senior Fellow and Professor of Economics - Stanford University

Charles C. Holt

CCH

Charles C. Holt

WHETHER OR NOT a long-run tradeoff exists between unemployment and inflation, there seems to be little politically acceptable opportunity, except in the short run, to buy employment at the cost of inflation. Exponents of the Phillips curve find that it is steep, and accelerationists find that the natural unemployment rate is high. Hall recently estimated that a 5.5 percent aggregate unemployment rate is necessary merely to keep inflation from accelerating. These findings point to a high floor for unemployment, which is resistant to a one-dimensional stabilization policy depending on manipulation of aggregate demand.