In New York State, an individual’s unemployment benefits depend on her previous earnings— the higher the earnings, the higher the benefits, up until a maximum benefit level is reached. In 1989, the state legislature and governor un-expectedly increased the maximum benefit level. This led to an increase in benefits for high earners, but no change in benefits for low earners [ Meyer and Mok, 2007]. How might a researcher take advantage of this scenario to con-duct a difference- in- difference quasi- experiment to estimate the effect of unemployment benefits on unemployment duration? Be sure to describe both the treatment group and the control group. What is the key assumption required for this quasi- experiment to generate unbiased estimates of the effect of unemployment insurance on un-employment duration?
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