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Unemployment Outflow and Unemployment Insurance Taxes

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  • Stepan Jurajda

    (CERGE-EI)

Abstract

The system of Unemployment Insurance (UI) financing in the US draws its funds from a payroll tax on employers and varies the tax rate according to the individual employer's layoff history. There exists extensive evidence on the effect of this so-called experience rated tax on layoff decisions. However, since firms are liable for each dollar of regular UI benefits paid to laid off former employees, experience rating may also affect recall behavior. The present study therefore measures the effect of the UI financing system on the duration of unemployment. Using duration data is essential since tax charges to the firm vary over the duration of unemployment spells. Empirical results based on data with various sources of variation suggest that higher layoff tax costs shorten the duration of recall unemployment.

Suggested Citation

  • Stepan Jurajda, 2001. "Unemployment Outflow and Unemployment Insurance Taxes," Labor and Demography 0012005, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0012005
    Note: Type of Document - Acrobat PDF; pages: 23 ; figures: Included
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    References listed on IDEAS

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    1. Guido Imbens & Lisa Lynch, 2006. "Re-employment probabilities over the business cycle," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 5(2), pages 111-134, August.
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    3. Michael Baker & Samuel A. Rea, 1998. "Employment Spells And Unemployment Insurance Eligibility Requirements," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 80-94, February.
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    12. Stepan Jurajda, 2001. "In ow into Unemployment: Employment Spells and Unemployment Insurance," Labor and Demography 0012008, EconWPA.
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    More about this item

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • 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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