Unemployment Insurance Taxes and the Cyclical and Seasonal Properties of Unemployment

62 Pages Posted: 18 Apr 2007 Last revised: 16 Jul 2010

See all articles by David Card

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Phillip B. Levine

Wellesley College; National Bureau of Economic Research (NBER)

Date Written: March 1992

Abstract

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.

Suggested Citation

Card, David E. and Levine, Phillip B., Unemployment Insurance Taxes and the Cyclical and Seasonal Properties of Unemployment (March 1992). NBER Working Paper No. w4030. Available at SSRN: https://ssrn.com/abstract=980923

David E. Card (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Institute for the Study of Labor (IZA)

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National Bureau of Economic Research (NBER)

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Phillip B. Levine

Wellesley College ( email )

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United States
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National Bureau of Economic Research (NBER)

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United States

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