The Impact of Taxing Unemployment Insurance Benefits on Unemployment Duration and Post-unemployment Earnings

In 1979, unemployment insurance benefits became taxableincome for recipients with income above a specified threshold.Further legislation in 1982 lowered the income threshold. Thispaper uses the Continuous Wage and Benefit History (CWBH) database to evaluate the effects of the 1982 change on the compensatedduration of unemployment and post-unemployment earnings. The1982 episode is a particularly useful natural experimentbecause the treatment group (those newly subject to benefittaxation) is the middle income category and the two controlgroups (those whose benefits were already taxed and those whosebenefits still were not taxed) are the high and low income categories.If the two control groups show similar trends in unemploymentduration (or post-unemployment earnings) and the treatment groupshows a strikingly different pattern, this is compelling evidenceof a tax effect. The empirical results suggest that taxing unemploymentbenefits reduced the affected workers' mean compensated durationby more than a week, but did not have a statistically significanteffect on their post-unemployment earnings.     

State Dependent Unemployment Benefits

Optimal design of unemployment insurance is considered in a search setting where the state of nature (business cycle) affects the unemployment risk and thus the return to search. The incentive effects or distortions of individual job search arising due to the unemployment insurance scheme are crucial for optimal policies, so is the scope for risk diversification that depends critically on whether the balanced budget requirement applies to each state of nature or across states of nature. In the former case a basic budget effect tends to cause optimal benefits to be procyclical. If risk diversification across states of nature is possible, the fact that incentives are more distorted in good than bad states of nature tends to make both benefits and contribution rates countercyclical. It is shown that countercyclical benefits exacerbate employment fluctuations but increase average employment by aligning benefits more with states of nature where the incentive costs are small.     

Disability Risk, Disability Benefits, and Equilibrium Unemployment

This paper analyses the labour market and efficiency effects of various kinds of disability policies. It therefore extends Pissarides (1990) model of equilibrium unemployment with disability risk and disability benefits and allows for the improper use of disability schemes by the unemployed. The paper finds that recognition of this improper use can reverse the ranking of policies. In addition, it concludes that disability policies that reduce the participation in disability schemes tend to increase the rate of official unemployment. Only policies that lower the rate of disability shocks succeed to reduce both the participation in disability and unemployment schemes.     

The Early Days of IFS

This year IFS celebrates its 21st birthday. To mark the occasion Director Bill Robinson invited the founder members to submit their recollections of how the Institute started and himserf explored the archives. The follo wing account of the early days of the Institute is the result.     

Forecasting the PSBR Outside Government: The IFS Perspective

Expectations regarding the future state of the public finances are vital for public policy formation. The UK experience has been that forecast of the PSBR have been beset with problems since the mid-1980s. Independent assessments of the accuracy and plausibility of public finance forecasts are an important check on government forecasts and serve to increase public debate over government finance issues. We examine the success of various possible methods available to those outside government. JEL classification: E6, H1, H6.     

对我国现行失业统计的探讨

我国现行的失业统计已有很大改进,但在失业人口、农村失业和隐性失业统计等还存在一些问题,通过分析这些问题与不足,对我国现行失业统计的改进提出了一些措施,包括:建立健全失业统计指标体系,完善失业统计调查方法;对失业人员的年龄应取消上限;加强下岗职工失业统计;加强隐性失业统计;加强农业失业人口统计.     

The Impact on Interest Rates of Unemployment Announcements and Their Revisions

The announced changes in monthly employment reports and in weekly new unemployment claim reports are based on new levels and on revisions to previous levels. We analyze the effect on interest rates of surprises to these two separate components of the changes. We find that for weekly reports the effect on interest rates of the new level is greater than the effect of the revisions. For monthly employment reports, the two components’ effects have similar strength.     

Unemployment fiscal multipliers

We estimate the effects of fiscal policy on the labor market in US data. An increase in government spending of 1 percent of GDP generates output and unemployment multipliers, respectively, of about 1.2 percent (at one year) and 0.6 percentage points (at the peak). Each percentage point increase in GDP produces an increase in employment of about 1.3 million jobs. Total hours, employment and the job finding probability all rise, whereas the separation rate falls. A standard neoclassical model augmented with search and matching frictions in the labor market largely fails in reproducing the size of the output multiplier whereas it can produce a realistic unemployment multiplier but only under a special parameterization. Extending the model to strengthen the complementarity in preferences, to include unemployment benefits, real wage rigidity and/or debt financing with distortionary taxation only worsens the picture. New Keynesian features only marginally magnify the size of the multipliers. When complementarity is coupled with price stickiness, however, the magnification effect can be large.     

The Net Benefits to Leverage

I estimate the market's valuation of the net benefits to leverage using panel data from 1994 to 2004, identified from market values and betas of a company's debt and equity. The median firm captures net benefits of up to 5.5% of firm value. Small and profitable firms have high optimal leverage ratios, as predicted by theory, but in contrast to existing empirical evidence. Companies are on average slightly underlevered relative to the optimal leverage ratio at refinancing. This result is mainly due to zero leverage firms. I also look at implications for financial policy.     

论对附加福利的课税--我国个人所得税完善的一个重要方向

对附加福利的征税,在国外已是普遍现象,其理论的依据在于公平、效率和反避税.我国征税有助于税制的完善,有利于控制个人所得税税源的流失,对企业所得税和社会保险税(费)的完善都有意义.从管理效率出发,附加福利税应对雇主征税,但这样的征税又违背税收的中性原则,因此,如何处理这一矛盾就成为开征附加福利税的关键.     

The Benefits of Financial Statement Comparability

Investors, regulators, academics, and researchers all emphasize the importance of financial statement comparability. However, an empirical construct of comparability is typically not specified. In addition, little evidence exists on the benefits of comparability to users. This study attempts to fill these gaps by developing a measure of financial statement comparability. Empirically, this measure is positively related to analyst following and forecast accuracy, and negatively related to analysts’ dispersion in earnings forecasts. These results suggest that financial statement comparability lowers the cost of acquiring information, and increases the overall quantity and quality of information available to analysts about the firm.     

Tax Coordination and Unemployment

This paper analyses the implications of unemployment for fiscal competition and tax coordination among small open economies. Unemployment is modeled as resulting from wage bargaining. The analysis focuses on the effect of labour and capital tax coordination on welfare. We show that, while coordinated capital and labour tax increases unambiguously raise welfare if labour markets are competitive, different results emerge if labour markets are unionised. It turns out that coordinated capital and labour tax increases may reduce welfare. This revised version was published online in July 2006 with corrections to the Cover Date.