Poor Performance as a Predictable Outcome: Financing the Administration of Unemployment Insurance
AbstractEffective administration of unemployment insurance (UI) is central to its ability to smooth consumption and act as an automatic stabilizer. The federal government's method of allocating funds to administer UI gives the states no incentive to provide quality service at reasonable cost. We first document the deteriorating performance of the UI system in recent recessions and present estimates of a descriptive model relating state workloads to performance. We then characterize UI administration as a standard principal-agent problem, which leads to a method of allocating funds that would motivate states to adopt new technologies and improve performance.
CitationLachowska, Marta, Alexandre Mas, and Stephen A. Woodbury. 2022. "Poor Performance as a Predictable Outcome: Financing the Administration of Unemployment Insurance." AEA Papers and Proceedings, 112: 102-06. DOI: 10.1257/pandp.20221073
- D82 Asymmetric and Private Information; Mechanism Design
- E32 Business Fluctuations; Cycles
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- J64 Unemployment: Models, Duration, Incidence, and Job Search
- J65 Unemployment Insurance; Severance Pay; Plant Closings