The U.S. government makes unemployment insurance (UI) more generous during recessions. In this thesis I study the interaction between unemployment insurance policies and labor market dynamics in a macroeconomic context. The first chapter examines government commitment and its role in shaping the dynamics of optimal UI over the business cycle. The second chapter proposes a quantitative theory featuring time-consistent policy to rationalize the increased generosity of UI benefit duration during recessions. The final chapter explores the link between allowing unemployed workers to keep uncollected UI benefits and future job-search incentives.