Robert Barro rides my hobby horse in this WSJ op-ed about the flawed incentive of the unemployment insurance system.
The peak unemployment rate of 10.1% in October 2009 corresponded to a mean duration of unemployment of 27.2 weeks and a share of long-term unemployment of 36%. The duration of unemployment peaked (thus far) at 35.2 weeks in June 2010, when the share of long-term unemployment in the total reached a remarkable 46.2%. These numbers are way above the ceilings of 21 weeks and 25% share applicable to previous post-World War II recessions. The dramatic expansion of unemployment-insurance eligibility to 99 weeks is almost surely the culprit.
... [S]uppose that the expansion of unemployment-insurance coverage to 99 weeks had not occurred ... the unemployment rate would have been 6.8% rather than 9.5%.
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