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Unemployment Insurance Benefits and Takeup Rates

  • Patricia M. Anderson
  • Bruce D. Meyer

Despite clear theoretical predictions of UI effects on takeup there is little work on the link between program generosity and the propensity to file for benefits. Administrative data allow us to assign the potential level and duration of benefits accurately for a sample of workers separating from their employers, whether or not UI was ever actually received. We then use these values along with marginal tax rates as our main explanatory variables in logit equation estimates of the probability that a separating employee receives UI. We find a strong positive effect of the benefit level on takeup, but little effect of the potential duration of benefits. The estimates imply elasticities of the takeup rate with respect to benefits of about 0.46 to 0.78. Our estimates also show that potential claimants respond to the tax treatment of benefits. Simulations of the effects of taxing UI benefits indicate that recent tax changes can account for most of the decline in UI receipt in the 1980's. In addition, we find theoretical and empirical support for the proposition that those with short unemployment spells are less likely to file. We show that if the decision to file for UI is affected by benefit levels and the expected duration of unemployment, it will bias estimates of the effects of UI on unemployment duration.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4787.

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Date of creation: Jun 1994
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Publication status: published as Quarterly Journal of Economics, as "Unemployment Insurance Take-up rates and the After-Tax Value of Benefits". vol.112, August 1997.
Handle: RePEc:nbr:nberwo:4787
Note: LS
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  1. Murphy, Kevin M & Topel, Robert H, 1997. "Unemployment and Nonemployment," American Economic Review, American Economic Association, vol. 87(2), pages 295-300, May.
  2. Kim B. Clark & Lawrence H. Summers, 1982. "Unemployment Insurance and Labor Force Transitions," NBER Working Papers 0920, National Bureau of Economic Research, Inc.
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  7. Rebecca Blank & David Card & Whitney Newey, 1988. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," Working Papers 623, Princeton University, Department of Economics, Industrial Relations Section..
  8. Katz, Lawrence F & Meyer, Bruce D, 1990. "Unemployment Insurance, Recall Expectations, and Unemployment Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 973-1002, November.
  9. 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.
  10. Lawrence Katz & Bruce Meyer, 1988. "The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment," Working Papers 621, Princeton University, Department of Economics, Industrial Relations Section..
  11. Lawrence F. Katz, 1986. "Layoffs, Recall and the Duration of Unemployment," NBER Working Papers 1825, National Bureau of Economic Research, Inc.
  12. Martin S. Feldstein, 1975. "The Importance of Temporary Layoffs: An Empirical Analysis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(3), pages 725-745.
  13. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  14. Gottschalk, Peter & Maloney, Tim, 1985. "Involuntary Terminations, Unemployment, and Job Matching: A Test of Job Search Theory," Journal of Labor Economics, University of Chicago Press, vol. 3(2), pages 109-23, April.
  15. Anderson, Patricia M, 1992. "Time-Varying Effects of Recall Expectation, a Reemployment Bonus, and Job Counseling on Unemployment Durations," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 99-115, January.
  16. Feldstein, Martin S, 1978. "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, American Economic Association, vol. 68(5), pages 834-46, December.
  17. 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.
  18. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  19. Rosen, Harvey S, 1976. "Taxes in a Labor Supply Model with Joint Wage-Hours Determination," Econometrica, Econometric Society, vol. 44(3), pages 485-507, May.
  20. 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.
  21. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
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  23. Joseph G. Altonji & Nicolas Williams, 1992. "The Effects of Labor Market Experience, Job Seniority, and Job Mobility on Wage Growth," NBER Working Papers 4133, National Bureau of Economic Research, Inc.
  24. Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, vol. 73(4), pages 541-59, September.
  25. 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.
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