Higher unemployment insurance benefits tend to increase unemployment because they (1) increase the opportunity cost of job search and, hence, increase the search time. (2) increase the opportunity cost of job search and, hence, decrease the search time. (3) reduce the opportunity cost of job search and, hence, increase the search time. (4) reduce the opportunity cost of job search and, hence, decrease the search time.

Higher unemployment insurance benefits act like a cushion for job seekers, allowing them to hold out for better job opportunities. This means that individuals may take longer to find a suitable job since the financial pressure to accept the first offer diminishes. As they feel less rushed, they end up prolonging their job search, which can contribute to a higher unemployment rate in the short term. Additionally, it's interesting to note that certain studies have shown that while generous unemployment benefits can lead to longer search durations, they can also help workers find jobs that better match their skills, ultimately benefiting the economy in the long run. Balancing these benefits with incentives to find work can be a challenge for policymakers!