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The Effects of Unemployment Insurance Taxes and Benefits on Layoffs Using Firm and Individual Data

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Author Info
Patricia M. Anderson
Bruce D. Meyer

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Abstract

We 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4960.

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Date of creation: Dec 1994
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Handle: RePEc:nbr:nberwo:4960

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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

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Feldstein, Martin S, 1978. "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, American Economic Association, vol. 68(5), pages 834-46, December. [Downloadable!] (restricted)
  2. Blank, Rebecca M & Card, David E, 1991. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1157-89, November. [Downloadable!] (restricted)
    Other versions:
  3. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June. [Downloadable!] (restricted)
  4. David Card & Phillip B. Levine, 1992. "Unemployment Insurance Taxes and the Cyclical and Seasonal Properties of Unemployment," NBER Working Papers 4030, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October. [Downloadable!] (restricted)
  6. Baily, Martin Neil, 1977. "On the Theory of Layoffs and Unemployment," Econometrica, Econometric Society, vol. 45(5), pages 1043-63, July. [Downloadable!] (restricted)
  7. Topel, Robert H, 1984. "Experience Rating of Unemployment Insurance and the Incidence of Unemployment," Journal of Law & Economics, University of Chicago Press, vol. 27(1), pages 61-90, April.
  8. Anderson, Patricia M, 1993. "Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1015-42, November. [Downloadable!] (restricted)
  9. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 225-38, January. [Downloadable!] (restricted)
  10. Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, vol. 73(4), pages 541-59, September. [Downloadable!] (restricted)
  11. Topel, Robert H, 1984. "Equilibrium Earnings, Turnover, and Unemployment: New Evidence," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 500-522, October. [Downloadable!] (restricted)
  12. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February. [Downloadable!] (restricted)
  13. Murphy, Kevin M & Topel, Robert H, 1997. "Unemployment and Nonemployment," American Economic Review, American Economic Association, vol. 87(2), pages 295-300, May. [Downloadable!] (restricted)
  14. Anderson, Patricia M & Meyer, Bruce D, 1993. "Unemployment Insurance in the United States: Layoff Incentives and Cross Subsidies," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages S70-95, January. [Downloadable!] (restricted)
  15. John M. Abowd & Orley C. Ashenfelter, 1981. "Anticipated Unemployment, Temporary Layoffs, and Compensating Wage Differentials," NBER Chapters, in: Studies in Labor Markets, pages 141-186 National Bureau of Economic Research, Inc. [Downloadable!]
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  16. McCall, Brian P, 1995. "The Impact of Unemployment Insurance Benefit Levels on Recipiency," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 189-98, April.
  17. Robert S. Smith, 1979. "Compensating wage differentials and public policy: A review," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 32(3), pages 339-362, April.
  18. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-57, October. [Downloadable!] (restricted)
  19. Adams, James D., 1986. "Equilibrium taxation and experience rating in a federal system of unemployment insurance," Journal of Public Economics, Elsevier, vol. 29(1), pages 51-77, February. [Downloadable!] (restricted)
  20. Patricia M. Anderson & Bruce D. Meyer, 1994. "Unemployment Insurance Benefits and Takeup Rates," NBER Working Papers 4787, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  21. Bruce D. Meyer, 1989. "A Quasi-Experimental Approach to the Effects of Unemployment Insurance," NBER Working Papers 3159, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Patricia M. Anderson & Bruce D. Meyer, 1995. "The Incidence of a Firm-Varying Payroll Tax: The Case of Unemployment Insurance," NBER Working Papers 5201, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Anja Deelen, 2005. "Adverse selection in disability insurance: empirical evidence for Dutch firms," CPB Discussion Papers 46, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  3. Jonathan Gruber & Julie Berry Cullen, 1996. "Spousal Labor Supply as Insurance: Does Unemployment Insurance Crowd Outthe Added Worker Effect?," NBER Working Papers 5608, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Roed,K. & Nordberg,M., 2001. "Temporary layoffs and the duration of unemployment," Memorandum 12/2001, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  5. Patricia M. Anderson & Bruce D. Meyer, 1998. "Using a Natural Experiment to Estimate the Effects of the Unemployment Insurance Payroll Tax on Wages, Employment, Claims, and Denials," NBER Working Papers 6808, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Kaushik Basu & Gary S. Fields & Shub Debgupta, 2007. "Labor Retrenchment Laws and their Effect on Wages and Employment: A Theoretical Investigation," IZA Discussion Papers 2742, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Rafael Lalive & Josef Zweimueller, 2002. "Benefit Entitlement and the Labor Market: Evidence from a Large-Scale Policy Change," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  8. Pierre Koning, 2005. "Estimating the Impact of Experience Rating on the Inflow into Disability Insurance in the Netherlands," Working Papers 05-07, Utrecht School of Economics. [Downloadable!]
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  9. Bruce D. Meyer & Dan T. Rosenbaum, 1996. "Repeat Use of Unemployment Insurance," NBER Working Papers 5423, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. James Costain, 1997. "Unemployment Insurance with Endogenous Search Intensity and Precautionary Saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  11. Katherine Baicker & Claudia Goldin & Lawrence F. Katz, 1997. "A Distinctive System: Origins and Impact of U.S. Unemployment Compensation," NBER Working Papers 5889, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. Hans H. Glismann & Klaus Schrader, 2001. "Alternative Systeme der Arbeitslosenversicherung — Das Beispiel der Vereinigten Staaten und des Vereinigten Königreichs," Kiel Working Papers 1032, Kiel Institute for the World Economy. [Downloadable!]
  13. Alan B. Krueger & Bruce D. Meyer, 2002. "Labor Supply Effects of Social Insurance," NBER Working Papers 9014, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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