DRAFT: Please do not cite without permission.
by Steven G. Craig and Michael G. Palumbo
ABSTRACT
Our goal in this paper is to understand how state governments design their particular UI programs. Specifically, we examine the potential for income redistribution to play a role, over and above conventional insurance motivations, in explaining variation in UI programs across states. We estimate panel regression models to explain cross-section and time-series variation in annual UI expenditures, number of unemployment weeks compensated and average weekly benefit amounts. We find insurance to play an important role in UI program design, but income redistribution (payments longer than necessary for reemployment) also explains a considerable share of state government policy. We separately identify determinants of "pure insurance" and "redistribution" motives and decompose each state's UI program into its insurance and redistribution components. Our findings indicate redistribution amounts to $5.6 billion annually. Finally, we analyze how UI interacts with state-controlled, low-income assistance programs.
August, 1997