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Financial transfers provided to individuals from friends and family members in times of need are difficult to measure, yet the role of private, informal assistance in determining economic outcomes is important to identify, as private transfers may serve as a source of insurance for households. In this paper, I use longitudinal data from the Panel Study of Income Dynamics (PSID) to measure the extent to which an unemployment spell increases the likelihood that a young worker receives a cash transfer from family. Using within-person variation in unemployment and cash transfer receipt, I find that unemployment increases the probability a young worker receives financial assistance from their family by 50 percent. I then use cross-state and cross-year variation in public unemployment insurance eligibility to evaluate the relationship between the informal private insurance flowing to young unemployed workers and its public counterpart. The increase in the probability of receiving a family transfer is reduced by half if the worker is eligible for unemployment insurance. Hence, my paper provides evidence that family-provided insurance responds to income shocks but is also a function of available public insurance. This implies that the trend towards stricter UI eligibility is partially absorbed by family networks. |
