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Poor Performance as a Predictable Outcome: Financing the Administration of Unemployment Insurance

Author

Listed:
  • Marta Lachowska
  • Alexandre Mas
  • Stephen A. Woodbury

Abstract

Effective administration of unemployment insurance (UI) is central to its ability to smooth consumption and act as an automatic stabilizer. The federal government's method of allocating funds to administer UI gives the states no incentive to provide quality service at reasonable cost. We first document the deteriorating performance of the UI system in recent recessions and present estimates of a descriptive model relating state workloads to performance. We then characterize UI administration as a standard principal-agent problem, which leads to a method of allocating funds that would motivate states to adopt new technologies and improve performance.

Suggested Citation

  • Marta Lachowska & Alexandre Mas & Stephen A. Woodbury, 2022. "Poor Performance as a Predictable Outcome: Financing the Administration of Unemployment Insurance," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 102-106, May.
    • Handle: RePEc:aea:apandp:v:112:y:2022:p:102-06
    DOI: 10.1257/pandp.20221073
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    Cited by:

    1. Jonathan Cohen & Geoffrey C. Schnorr, 2024. "Efficiency Costs of Unemployment Insurance Denial: Evidence from Randomly Assigned Examiners," Upjohn Working Papers 24-404, W.E. Upjohn Institute for Employment Research.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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