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Unemployment Insurance Benefits and Takeup Rates

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  • Patricia M. Anderson
  • Bruce D. Meyer

Abstract

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.

Suggested Citation

  • Patricia M. Anderson & Bruce D. Meyer, 1994. "Unemployment Insurance Benefits and Takeup Rates," NBER Working Papers 4787, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4787 Note: LS
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    Cited by:

    1. Carl Davidson & Stephen A. Woodbury, 2000. "Wage-Rate Subsidies for Dislocated Workers," Book chapters authored by Upjohn Institute researchers,in: Laurie J. Bassi & Stephen A. Woodbury (ed.), Long-term Unemployment and Reemployment Policies, pages 141-184 W.E. Upjohn Institute for Employment Research.
    2. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-161, April.
    3. Meyer, Bruce D, 1996. "What Have We Learned from the Illinois Reemployment Bonus Experiment?," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 26-51, January.
    4. Kapsalis, Constantine, 2000. "The Impact of Bill C-12 on New Entrants and Re-Entrants," MPRA Paper 26137, University Library of Munich, Germany.
    5. 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.
    6. Rafael Lalive & Josef Zweim�ller, "undated". "Benefit Entitlement and the Labor Market: Evidence from a Large-Scale Policy Change," IEW - Working Papers 105, Institute for Empirical Research in Economics - University of Zurich.
    7. Glismann, Hans H. & Schrader, Klaus, 2001. "Alternative Systeme der Arbeitslosenversicherung: das Beispiel der Vereinigten Staaten und des Vereinigten Königreichs," Kiel Working Papers 1032, Kiel Institute for the World Economy (IfW).
    8. Carl Davidson & Stephen A. Woodbury, 2001. "From Social Experiment to Program," Book chapters authored by Upjohn Institute researchers,in: Philip K. Robins & Robert G. Spiegelman (ed.), Reemployment Bonuses in the Unemployment Insurance System: Evidence from Three Field Experiments, chapter 6, pages 175-222 W.E. Upjohn Institute for Employment Research.

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