Experience rating the unemployment insurance tax: simulation results for Finland

Heikki Korpela

No 173, Working Papers from VATT Institute for Economic Research

Abstract: I study the potential effects of introducing experience rating for the unemployment insurance tax in Finland. I simulate an array of potential rating systems using register data for all wages and unemployment from 2001 to 2021. Under the current tax regime, about half of all unemployment costs are attributable to employers who pay less than 10% of the UI tax. All the simulated systems would significantly reduce this discrepancy but also differ markedly from each other. The choices in designing the system are reflected in its administrative burden, how strongly it incentivises hirings and discourages dismissals, and how quickly it responds to employment changes.

Keywords: unemployment insurance; experience rating; Labour markets and education; D22; H25; H71; J32; J38; J65; fi=Sosiaaliturva|sv=Social trygghet|en=Social security|; fi=Työmarkkinat|sv=Arbetsmarknad|en=Labour markets|; fi=Verotus|sv=Beskattning|en=Taxation| (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-lab and nep-pbe
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