The Effects of Unemployment Insurance Taxes and Benefits on Layoffs Using Firm and Individual Data
AbstractWe examine the effects of unemployment insurance (UI) experience rating on layoffs using high quality firm and individual data. Our preferred estimates imply that incomplete experience rating is responsible for over twenty percent of temporary layoffs. The results are more mixed regarding the predictions of the alternative models of UI as a firm adjustment cost or a component of the worker compensation package. While the evidence favors the adjustment cost model, some of the predictions of each of these models are rejected by at least one of our specifications. Using our new data, we also confirm the correlation between experience rating proxies and layoffs found in past studies. However, the differences between these proxies and state average firm tax costs and the anomalous instrumental variables estimates that we find suggest that it may be inappropriate to causally interpret this correlation.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4960.
Date of creation: Dec 1994
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Find related papers by JEL classification:
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
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