Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits

Abstract

The recent decline in the unemployment insurance (UI) takeup rate has puzzled researchers. Using administrative data with accurate information on the potential level and duration of benefits, we examine whether a separating employee receives UI. We find a strong positive effect of the benefit level on takeup, and smaller effects of the potential duration and the tax treatment of benefits. Simulations indicate that the recent inclusion of UI in the income tax base can account for most of the previously unexplained decline in UI receipt.