NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Unemployment Insurance Taxes and the Cyclical and Seasonal Properties of Unemployment

David Card, Phillip B. Levine

NBER Working Paper No. 4030
Issued in March 1992
NBER Program(s):   LS

We combine Current Population Survey microdata for 1979-1987 with a newly assembled database of tax rates for the Unemployment Insurance system to measure the effects of imperfect experience-rating on temporary layoffs and other types of unemployment. We find a strong negative association between the degree of experience-rating and the rate of temporary layoff unemployment, with the largest effect in recessionary years and the smallest effect in expansionary years. Increases in the degree of experience-rating are also associated with dampened seasonal fluctuations in temporary layoffs, particularly in construction and durable manufacturing. The correlation between the degree of experience-rating and the unemployment rate of permanent job losers is smaller but also negative, whereas the correlation with the unemployment Me of job quitters and re-entrants is negligible. Attempts to control for the endogeneity of unemployment insurance taxes are consistent with a causal interpretation of our findings.

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Document Object Identifier (DOI): 10.3386/w4030

Published: Journal of Public Economics, vol 53, no. 1 (February 1994)

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