Experience Rating as an Automatic Stabilizer / Mark Duggan, Andrew C. Johnston, Audrey Guo.

Format:

Book

Author/Creator:

Duggan, Mark.

Contributor:

National Bureau of Economic Research.

Johnston, Andrew C.

Guo, Audrey.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30651.

NBER working paper series no. w30651

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

Unemployment insurance taxes are experience-rated to penalize firms that dismiss workers. We examine whether experience rating acts as an automatic stabilizer in the labor market. We exploit the fact that penalties for layoffs vary by state using detailed data on state tax schedules, and we measure whether firms react less to labor-demand shocks in the presence of greater layoff penalties. The average penalty for layoffs reduces firm adjustment to negative shocks by 11 percent. The results imply experience rating has a stabilizing influence on labor markets. Experience rating saved, for instance, nearly a million jobs in the Great Recession.

Notes:

Print version record

November 2022.