A Dichotomous Analysis of Unemployment Benefits

Xingwei Hu

Papers from arXiv.org

Abstract: Using equal employment opportunity as a fairness hypothesis, real-time balanced-budget rule as a constraint, and policy stability as an objective, we derive a scientific formula for taxation policy and formulate a fair allocation for unemployment benefits. The general setting is a coalitional game in which a random subset of the players is selected to take a task, resulting in a random payoff; we attempt to divide the payoff among the players fairly. The formula describes a fair, debt-free, and asymptotic risk-free payroll tax rate for given unemployment and spending levels. Also robust to the choice of other objectives, the tax rate stimulates employment and boosts productivity within this fair and sustainable framework. With additional assumptions on productivity, the tax rate results in equality of outcome, reducing poverty and economic inequality. The fair division rule and the valuation approach could be applied to similar profit- or cost-sharing situations, including voting rights, health insurance, road sharing, and machine learning.

Date: 2018-08, Revised 2024-11
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