IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v49y2021i3p392-434.html

The Finance of Unemployment Compensation and Its Consequences

Author

Listed:
  • Audrey Guo
  • Andrew C. Johnston

Abstract

Economists have contributed important theoretical and empirical findings to the study of unemployment insurance (UI) benefits, but a deliberate study of the effect of UI taxation’s unique structure remains undone. We summarize available evidence on UI taxation, describe the history and institutions of experience rating, and outline important lines of inquiry for future work. As unemployment has risen, so has the need for a body of policy-relevant knowledge about the function and financing of UI systems.

Suggested Citation

  • Audrey Guo & Andrew C. Johnston, 2021. "The Finance of Unemployment Compensation and Its Consequences," Public Finance Review, , vol. 49(3), pages 392-434, May.
    • Handle: RePEc:sae:pubfin:v:49:y:2021:i:3:p:392-434
    DOI: 10.1177/10911421211021389
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/10911421211021389
    Download Restriction: no
    File URL: https://libkey.io/10.1177/10911421211021389?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Behaghel, Luc & Crépon, Bruno & Sédillot, Béatrice, 2008. "The perverse effects of partial employment protection reform: The case of French older workers," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 696-721, April.
    2. Hartley, Gonzalo Reyes & van Ours, Jan C. & Vodopivec, Milan, 2011. "Incentive effects of unemployment insurance savings accounts: Evidence from Chile," Labour Economics, Elsevier, vol. 18(6), pages 798-809.
    3. Julia Fath & Clemens Fuest, 2005. "Experience Rating of Unemployment Insurance in the US: A Model for Europe?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(02), pages 45-50, July.
    4. Anderson, Patricia M. & Meyer, Bruce D., 2000. "The effects of the unemployment insurance payroll tax on wages, employment, claims and denials," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 81-106, October.
    5. Lester Lusher & Geoffrey C. Schnorr & Rebecca L.C. Taylor, 2022. "Unemployment Insurance as a Worker Indiscipline Device? Evidence from Scanner Data," American Economic Journal: Applied Economics, American Economic Association, vol. 14(2), pages 285-319, April.
    6. Anderson, Patricia M. & Meyer, Bruce D., 1997. "The effects of firm specific taxes and government mandates with an application to the U.S. unemployment insurance program," Journal of Public Economics, Elsevier, vol. 65(2), pages 119-145, August.
    7. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 381-402.
    8. Wang, Cheng & Williamson, Stephen D., 2002. "Moral hazard, optimal unemployment insurance, and experience rating," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1337-1371, October.
    9. Raj Chetty & Nathaniel Hendren & Patrick Kline & Emmanuel Saez, 2014. "Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1553-1623.
    10. Suzanne Simonetta, 2017. "What the EU Can Learn from the American Experience with Unemployment Insurance," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 52(3), pages 142-148, May.
    11. Katherine Baicker & Claudia Goldin & Lawrence F. Katz, 1998. "A Distinctive System: Origins and Impact of U.S. Unemployment Compensation," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 227-264, National Bureau of Economic Research, Inc.
    12. Olivier J. Blanchard & Jean Tirole, 2008. "The Joint Design of Unemployment Insurance and Employment Protection: A First Pass," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 45-77, March.
    13. 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 915-938, October.
    14. Patricia M. Anderson, 1993. "Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 1015-1042.
    15. Anderson, Patricia M. & Meyer, Bruce D., 2006. "Unemployment Insurance Tax Burdens and Benefits: Funding Family Leave and Reforming the Payroll Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(1), pages 77-95, March.
    16. Feldstein, Martin S, 1978. "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, American Economic Association, vol. 68(5), pages 834-846, December.
    17. Andrew C. Johnston & Alexandre Mas, 2018. "Potential Unemployment Insurance Duration and Labor Supply: The Individual and Market-Level Response to a Benefit Cut," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2480-2522.
    18. Andrew C. Johnston, 2021. "Unemployment Insurance Taxes and Labor Demand: Quasi-Experimental Evidence from Administrative Data," American Economic Journal: Economic Policy, American Economic Association, vol. 13(1), pages 266-293, February.
    19. Hakola, Tuulia & Uusitalo, Roope, 2005. "Not so voluntary retirement decisions? Evidence from a pension reform," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2121-2136, December.
    20. Card, David & Levine, Phillip B., 1994. "Unemployment insurance taxes and the cyclical and seasonal properties of unemployment," Journal of Public Economics, Elsevier, vol. 53(1), pages 1-29, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Korpela, Heikki, 2025. "Experience rating the unemployment insurance tax: simulation results for Finland," Working Papers 173, VATT Institute for Economic Research.
    2. Mark Duggan & Audrey Guo & Andrew C. Johnston, 2023. "Experience Rating as an Automatic Stabilizer," Tax Policy and the Economy, University of Chicago Press, vol. 37(1), pages 109-133.
    3. Guo, Audrey, 2024. "Payroll tax incidence: Evidence from unemployment insurance," Journal of Public Economics, Elsevier, vol. 239(C).
    4. Mark Duggan & Audrey Guo & Andrew C. Johnston, 2022. "Would Broadening the UI Tax Base Help Low-Income Workers?," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 107-111, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guo, Audrey & Johnston, Andrew C., 2020. "The Finance of Unemployment Compensation and its Consequence for the Labor Market," IZA Discussion Papers 13330, IZA Network @ LISER.
    2. Guo, Audrey, 2020. "The Effects of Unemployment Insurance Taxation on Multi-Establishment Firms," MPRA Paper 97919, University Library of Munich, Germany.
    3. Andrew C. Johnston, 2021. "Unemployment Insurance Taxes and Labor Demand: Quasi-Experimental Evidence from Administrative Data," American Economic Journal: Economic Policy, American Economic Association, vol. 13(1), pages 266-293, February.
    4. L'Haridon, Olivier & Malherbet, Franck, 2009. "Employment protection reform in search economies," European Economic Review, Elsevier, vol. 53(3), pages 255-273, April.
    5. Mark Duggan & Audrey Guo & Andrew C. Johnston, 2023. "Experience Rating as an Automatic Stabilizer," Tax Policy and the Economy, University of Chicago Press, vol. 37(1), pages 109-133.
    6. Rainer Eppel & Thomas Horvath & Helmut Mahringer, 2018. "Das Aussetzen von Beschäftigungsverhältnissen als betriebliche Strategie zum Ausgleich schwankenden Personalbedarfs. Ein Update," WIFO Studies, WIFO, number 61245.
    7. Adriana D. Kugler, 2001. "From severance pay to self-insurance: Effects of severance payments savings accounts in Colombia," Economics Working Papers 592, Department of Economics and Business, Universitat Pompeu Fabra.
    8. repec:eee:labchp:v:3:y:1999:i:pc:p:2985-3028 is not listed on IDEAS
    9. Michau, Jean-Baptiste, 2015. "Optimal labor market policy with search frictions and risk-averse workers," Labour Economics, Elsevier, vol. 35(C), pages 93-107.
    10. Rainer Eppel & Thomas Horvath & Helmut Mahringer, 2018. "Das Aussetzen von Beschäftigungsverhältnissen als betriebliche Strategie zum Ausgleich von Schwankungen des Personalbedarfs. Ein Update," WIFO Monatsberichte (monthly reports), WIFO, vol. 91(11), pages 799-810, November.
    11. Kyyrä, Tomi & Tuomala, Juha, 2023. "The effects of employers’ disability and unemployment insurance costs on benefit inflows," Labour Economics, Elsevier, vol. 85(C).
    12. Romain Duval & Prakash Loungani, 2021. "Designing Labor Market Institutions in Emerging Market and Developing Economies: A Review of Evidence and IMF Policy Advice," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(1), pages 31-83, March.
    13. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
    14. Guo, Audrey & Wallskog, Melanie, 2025. "New employer payroll taxes and entrepreneurship," Journal of Public Economics, Elsevier, vol. 250(C).
    15. Rainer Eppel & Helmut Mahringer, 2026. "Ein-Monats-Experience-Rating in der Arbeitslosenversicherung: ein Modellvorschlag," WIFO Working Papers 719, WIFO.
    16. Patricia M. Anderson & Bruce D. Meyer, 1994. "The Effects of Unemployment Insurance Taxes and Benefits on Layoffs Using Firm and Individual Data," NBER Working Papers 4960, National Bureau of Economic Research, Inc.
    17. Kugler, Adriana, 2000. "The Incidence of Job Security Regulations on Labor Market Flexibility and Compliance in Colombia: Evidence from the 1990 Reform," IDB Publications (Working Papers) 3267, Inter-American Development Bank.
    18. Ruffo Hernán & Caullo Laura & Capello Marcelo, 2024. "Efectos de una reforma de la indemnización por despido en Argentina," Asociación Argentina de Economía Política: Working Papers 4760, Asociación Argentina de Economía Política.
    19. Guo, Audrey, 2024. "Payroll tax incidence: Evidence from unemployment insurance," Journal of Public Economics, Elsevier, vol. 239(C).
    20. Boeri, Tito & Garibaldi, Pietro, 2019. "A tale of comprehensive labor market reforms: Evidence from the Italian jobs act," Labour Economics, Elsevier, vol. 59(C), pages 33-48.
    21. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392, Elsevier.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:49:y:2021:i:3:p:392-434. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.