Poor Performance as a Predictable Outcome: Financing the Administration of Unemployment Insurance

Marta Lachowska, Alexandre Mas and Stephen Woodbury

Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: Effective administration of unemployment insurance (UI) is central to its ability to smooth consumption and act as an automatic stabilizer. The federal government’s method of allocating funds to administer UI gives the states no incentive to provide quality service at reasonable cost. We first document the deteriorating performance of the UI system in recent recessions and present estimates of a descriptive model relating state workloads to performance. We then characterize UI administration as a standard principal-agent problem, which leads to a method of allocating funds that would motivate states to adopt new technologies and improve performance.

Keywords: unemployment insurance; government (search for similar items in EconPapers)
JEL-codes: E24 J65 (search for similar items in EconPapers)
Date: 2022-01
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Citations: View citations in EconPapers (1)

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