An Econometric Analysis of Unemployment Insurance Benefit Adequacy
Upjohn Institute Working Paper 90-05
Christopher J. O'Leary
NOTE: A revised version of this paper appears in Research in Employment Policy, Volume I: Reform of the Unemployment Insurance System, L. Bassi and S. Woodbury, eds. Stamford, CT: JAI Press, 1998, pp. 63-110.
Abstract
Traditionally studies of unemployment insurance benefit adequacy have relied on an
expenditure survey. This is expensive, yields small samples, and presumes that the analyst
knows which categories of expenditure are necessary. This paper uses an existing large data
set, and an agnostic approach. Labor supply are equations are estimated on PSID data using
an estimator which accounts for rationing in the labor market. The results are used to compute
labor market constraint compensation for comparison to payments under UI systems of
representative states. The results suggest that payments which meet the accepted standard of
adequacy would usually slightly overcompensate individuals.
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