Economic Effects of Unemployment Insurance and Workers' Compensation

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Unemployment Insurance (UI) is an important an expensive program. In 1987, over 2.0 million people received unemployment insurance each week at a cost of 15.1 billion dollars. Workers' Compensation (WC) is an increasingly expensive program that currently costs almost twice as much as the Unemployment Insurance Program. Between 1970 and 1987, WC benefit payments rose at an annual rate of 7% after accounting for inflation. In 1987, total benefit payments reached $27.4 billion, with an insurance cost to employers of more than $34 billion. The purpose of this research is to assess the effects of higher UI and WC benefits by examining people who file just before and just after increases in benefits. These natural experiments provide exogenous changes in benefits that can be related to a number of outcomes. The WC study includes an examination of medical cost containment, post-injury health and earnings, and income distribution effects. The UI study includes an examination of UI experience rating and its relationship to layoffs and recalls, the concentration of UI receipts in certain individuals and firms, and firm histories of layoffs and recalls. An important part of this study is the documentation of a large data set, containing over 30 million records, which provides a nearly ideal source to analyze these and other questions.