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Title: |
Unemployment Insurance and State Economic Activity |
| Author: |
Lee, Kyung Won;
Schmidt, James R.; Rejda, George E. |
| Author
Affiliation: |
Seoul
Development Institute; U NE |
| Source: |
International Economic Journal, Autumn 1999, v. 13, no. 3, pp. 77-95 |
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Publication Date: |
Autumn 1999 |
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Abstract: |
The unemployment insurance (UI) system
collects premiums from firms and provides temporary compensation to
involuntarily unemployed workers. The system has traditionally been
viewed as an automatic stabilizer for national and area economies. This
paper examines the impacts that UI benefits and contributions have had
upon general economic activity in California and Michigan, large states
that have experienced episodes of moderate and high unemployment rates,
respectively, during the past two decades. For each state, we prepare a
multiequation model of the economy and impose constraints represented by
cointegrating vectors. Impulse responses measuring the impact of UI
benefits and contributions on the economies are obtained from the
models. The strengths of the responses are assessed using significance
tests based upon distributions that have been derived for models
containing cointegrating vectors. The results indicate that UI benefits
and contributions provide little impact of consequence upon general
economic activity in the two states. |
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