UNEMPLOYMENT-INSURANCE TAXES AND THE CYCLICAL AND SEASONAL PROPERTIES OF UNEMPLOYMENT

We combine Current Population Survey micro data for 1979-1987 with a newly assembled database of tax rates for the U.S. unemployment insurance system to measure the effects of imperfect experience-rating on the incidence of unemployment. We find a strong negative association between the degree of experience-rating and the rate of temporary layoff unemployment, with the largest effect in recessionary years and the smallest effect in expansionary years. Increases in the degree of experience-rating are also associated with dampened seasonal fluctuations in temporary layoffs, particularly in construction and durable manufacturing.