Reflections on the Use of Economic Research in Government during the Great Recession

1. Reflections on the Use of Economic Research in Government during the Great Recession Alan B. Krueger Princeton University & NBER May 15, 2011

3. Examples of Policies Health Care Reform • Taxes • Subsidies • Lack of insurance Financial Regulatory Reform • Insurance • Capital TARP • Autos • Banks • Housing Need for Additional Stimulus Health of State and Local Gov’ts • Fiscal Drag • Build America Bonds Energy/Cap & Trade HIRE Act/NJTC Small Business Lending Fund Infrastructure Unemployment Insurance Budget/TROIKA Tax Policy • FTHBC • Bank Tax • Section 529 Accounts • Investment incentives Social Security/Medicare Disability Insurance Immigration GSEs

5. Survey Design • Start with universe of UI recipients in NJ in late September 2009 • Stratified random sample (n=6,025) • -- Strata consisted of duration of unemployment by email address on file • -- Over sampled long term unemployed and those with email addresses • NJ LWD sent letter inviting participation in early October 2009 • Web survey – questions on time use, job search, swb, reservation wage • consumption, disability insurance applications, etc. • Entry Survey (wealth, demographics, previous job) • -- Offered $20 for participation or $40 if wait 12 weeks (46% took latter) • 12 weekly surveys, starting w/ week of entry survey (s, wR, job offers, etc.) • -- Weekly reminders • Extended Survey: Additional 12 weeks of interviews for those with 60 weeks of unemployment to start in order to study effect of exhausting UI benefits

6. Median

7. t=0

8. Reservation Wage

10. Log Reservation Wage Models for Various Subgroups

11. Subjective Well-Being

12. Subjective Well-Being

13. Subjective Well-Being • Happiness declines over spell of unemployment and sadness and stress rise. • Sadness rises twice as fast during episodes of job search.