EconPapers    
Economics at your fingertips  
 

Eligibility, Experience Rating, and Unemployment Insurance Take-up

Stéphane Auray and David L. Fuller ()
Additional contact information
David L. Fuller: Université du Wisconsin-Oshkosh

No 2018-18, Working Papers from Center for Research in Economics and Statistics

Abstract: In this paper we investigate the causes and consequences of "unclaimed" unemployment insurance (UI) benefits. A search model is developed where the costs to collecting UI benefits include both a traditional "fixed" administrative cost and an endogenous cost arising from worker and firm interactions. Experience rated taxes give firms an incentive to challenge a worker's UI claim, and these challenges are costly for the worker. Exploiting data on improper denials of UI benefits across states in the U.S. system, a two-way fixed e ects analysis shows a statistically significant negative relationship between the improper denials and the UI take-up rate, providing empirical support for our model. We calibrate the model to elasticities implied by the two-way fixed e ects regression to quantify the relative size of these UI collection costs. The results imply that on average the costs associated with firm challenges of UI claims account for 42% of the total costs of collecting, with improper denials accounting for 6% of the total cost. The endogenous collection costs imply the unemployment rate responds much slower to changes in UI benefits relative to a model with fixed collection costs. Finally, removing all eligibility requirements and allowing workers to collect UI benefits without cost increases welfare by almost 5% with minimal impact on the unemployment rate.

Keywords: Unemployment Insurance; Take-up Rate; Experience Rating; Matching Frictions; Search (search for similar items in EconPapers)
JEL-codes: E61 J32 J64 J65 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias and nep-mac
Date: 2018-10-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://crest.science/RePEc/wpstorage/2018-18.pdf CREST working paper version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:crs:wpaper:2018-18

Access Statistics for this paper

More papers in Working Papers from Center for Research in Economics and Statistics Contact information at EDIRC.
Bibliographic data for series maintained by Sri Srikandan ().

 
Page updated 2019-11-09
Handle: RePEc:crs:wpaper:2018-18