Unintended Consequences of Unemployment Insurance Benefits: The Role of Banks

Arslan, Yavuz ORCID: 0000-0002-7664-3999, Degerli, Ahmet and Kabas, Gazi (2023) Unintended Consequences of Unemployment Insurance Benefits: The Role of Banks. [Preprint]

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Official URL: http://dx.doi.org/10.2139/ssrn.3280437

Abstract

We use disaggregated U.S. data and a border discontinuity design to show that more generous unemployment insurance (UI) policies lower bank deposits. We test several channels that could explain this decline and find evidence consistent with households lowering their deposit holdings due to reduced precautionary savings. Since deposits are the largest and most stable source of funding for banks, the decrease in deposits affects bank lending. Banks that raise deposits in states with generous UI policies reduce their loan supply to small businesses. Furthermore, counties that are served by these banks experience a higher unemployment rate and lower wage growth.

Item Type:	Preprint
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	22 Dec 2023 13:36
Last Modified:	16 Mar 2024 02:52
DOI:	10.2139/ssrn.3280437
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3177632