Unemployment insurance taxes and the cyclical and seasonal properties of unemployment
We combine Current Population Survey microdata for 1979-1987 with a newly assembled database of tax rates for the Unemployment Insurance system to measure the effects of imperfect experience-rating on temporary layoffs and other types of unemployment. We find a strong negative association between the degree of experience-rating and the rate of temporary layoff unemployment, with the largest effect in recessionary years and the smallest effect in expansionary years. Increases in the degree of experience-rating are also associated with dampened seasonal fluctuations in temporary layoffs, particularly in construction and durable manufacturing. The correlation between the degree of experience-rating and the unemployment rate of permanent job losers is smaller but also negative, whereas the correlation with the unemployment Me of job quitters and re-entrants is negligible. Attempts to control for the endogeneity of unemployment insurance taxes are consistent with a causal interpretation of our findings.
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- Burdett, Kenneth & Wright, Randall, 1989. "Unemployment Insurance and Short-Time Compensation: The Effects on Layoffs, Hours per Worker, and Wages," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1479-96, December.
- Brown, Eleanor P, 1986. "Unemployment Insurance Taxes and Cyclical Layoff Incentives," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 50-65, January.
- 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.
- Angrist, J.D., 1991. "Linear Instrumental Variables Estimation Of Average Treatment Effects In Nonlinear Models," Harvard Institute of Economic Research Working Papers 1542, Harvard - Institute of Economic Research.
- Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
- Topel, Robert H, 1984. "Experience Rating of Unemployment Insurance and the Incidence of Unemployment," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 61-90, April.
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