Unemployment-Insurance Taxes and Labor Demand: Quasi-Experimental Evidence from Administrative Data

Arbeitspapier

To finance unemployment insurance, states raise payroll tax rates on employers who engage in layoffs. Tax rates are, therefore, highest for firms after downturns, potentially hampering labor-market recovery. Using full-population, administrative records from Florida, I estimate the effect of these tax increases on firm behavior leveraging a regression kink design in the tax schedule. Tax hikes reduce hiring and employment substantially, with no effect on layoffs or wages. The results imply unanticipated costs of the financing regime which reduce the optimal benefit by a quarter and account for twelve percent of the unemployment in the wake of the Great Recession.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 13117

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Empirical Analysis ; Taxation and Subsidies: Incidence ; Business Taxes and Subsidies including sales and value-added (VAT) ; State and Local Taxation, Subsidies, and Revenue ; Labor Demand ; Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions ; Wages, Compensation, and Labor Costs: Public Policy ; Unemployment Insurance; Severance Pay; Plant Closings
• Subject: unemployment insurance ; payroll taxes ; recession

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Johnston, Andrew C.
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/216429
• Last update: 10.03.2025, 11:41 AM CET