Unemployment Insurance Take-up Rate"s in an Equilibrium Search Model

Stéphane Auray, David Fuller and Damba Lkhagvasuren

No 2013-12, Working Papers from Center for Research in Economics and Statistics

Abstract: In the US unemployment insurance (UI) system, only a fraction of those eligible for benefits actually collect them. We estimate this fraction using CPS data and detailed state-level eligibility criteria. It averaged 77% from 1989 - 2012 and is negatively correlated with the unemployment rate. These empirical facts are explained in an equilibrium search model where firms finance UI benefits and are heterogeneous with respect to their specific tax rate, which is experience rated. In equilibrium, low tax firms effectively offer workers an alternative UI scheme featuring a faster job arrival rate and a higher wage offer. Some eligible workers prefer the “market" scheme and thus do not collect UI. The model captures the negative correlation between the take-up and unemployment rate. If all eligible unemployed collect, benefit expenditures increase by 16% and welfare increases. Average search effort decreases, but the unemployment rate and duration decrease as vacancy creation increases

Keywords: Unemployment insurance; Take-up; Matching frictions; Search (search for similar items in EconPapers)
JEL-codes: E61 J32 J64 J65 (search for similar items in EconPapers)
Pages: 48
Date: 2013-10
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Unemployment insurance take-up rates in an equilibrium search model (2019)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2018)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2018)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2017)
Working Paper: Unemployment Insurance Take-up Rates in an Equilibrium Search Model (2013)
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