Bruce D. Meyer

Unemployment Insurance and Unemployment Spells

This paper tests the effects of the level and length of unemployment insurance (UI) benefits on unemployment durations. The paper particularly studies individual behavior during the weeks just prior to when benefits lapse. Higher UI benefits are found to have a strong negative effect on the probability of leaving unemployment. However, the probability of leaving unemployment rises dramatically just prior to when benefits lapse. When the length of benefits is extended, the probability of a spell ending is also very high in the week benefits were previously expected to lapse. Individual data are used with accurate information on spell durations, and the level and length of benefits. Semiparametric estimation techniques are used and compared to alternative approaches. The semiparametric approach yields more plausible estimates and provides useful diagnostics.

Natural and Quasi- Experiments in Economics

Using research designs patterned after randomized experiments, many recent economic studies examine outcome measures for treatment groups and comparison groups that are not randomly assigned. By using variation in explanatory variables generated by changes in state laws, government draft mechanisms, or other means, these studies obtain variation that is readily examined and is plausibly exogenous. This paper describes the advantages of these studies and suggests how they can be improved. It also provides aids in judging the validity of inferences they draw. Design complications such as multiple treatment and comparison groups and multiple pre- or post-intervention observations are advocated.

Ethnic and Racial Self-Employment Differences and Possible Explanations

We show that entrepreneurship rates differ substantially across 60 ethnic and racial groups in the United States. These differences exist within broad combinations of groups such as Asians and Hispanics, and are almost as great after regression controls, including age, education, immigrant status, and time in the country. We then provide evidence on a number of theories of entrepreneurship. An ethnic/racial groups self-employment rate is positively associated with the difference between average self-employment and wage/salary earnings for that group. Ethnic/racial groups which immigrate from countries with high business ownership rates do not have high business ownership rates in the U.S. Finally, we find that the more advantaged ethnic/racial groups, measured by wage/salary earnings, self-employment earnings, and unearned income, and not the more disadvantaged groups, have the highest self-employment rates.

The impact of the potential duration of unemployment benefits on the duration of unemployment

Abstract This paper examines the impact of the potential duration of unemployment insurance (UI) benefits on unemployment in the United States. First, we use a large sample of household heads to examine differences in the unemployment spell distributions of UI recipients and nonrecipients. Sharp increases in the escape rate from unemployment both through recalls and new job acceptances are apparent for UI recipients around the time of benefits exhaustion. Such increases are not apparent at similar points of spell duration for nonrecipients. Second, our analysis of accurate administrative data from 12 states indicates that a one week increase in potential benefit duration increases the average duration of the unemployment spells of UI recipients by 0.16 to 0.20 weeks.

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

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.

Trends in Self-Employment among White and Black Men during the Twentieth Century

We examine white and black male nonagricultural self-employment from 1910 to 1997. Self-employment rates fell through 1970 and then rose. White male trends were due to declining rates within industries, ending in 1970, counterbalanced by a continuing shift toward high self-employment industries. Social security and immigration do not explain the recent upturn. Black male rates have been roughly one-third of white rates from 1910 to 1997. Blacks are not concentrated in low self-employment rate industries. Absent continuing forces limiting black self-employment, a simple inter-generational model suggests quick convergence of black and white rates.

Labor Supply at the Extensive and Intensive Margins: The EITC, Welfare, and Hours Worked

Some previous studies have emphasized differences between labor-supply responses on the extensive margin (participation) and intensive margin (hours worked) (e.g., James J. Heckman, 1993; Jean Kimmel and Thomas J. Kniesner, 1998). Recent tax and welfare policy changes provide a potentially more convincing way of identifying these responses than is available in other nonexperimental data. The Earned Income Tax Credit (EITC) changes during the 1990– 1996 period sharply altered the budget sets of single mothers over a short period of time. These changes in incentives are likely to be unrelated to differences across individuals in the desire to work and thus are likely to be exogenous to labor-supply decisions. This lack of exogeneity is harder to claim for wage differences across people, which are the main alternative source of identifying variation. In addition to preference heterogeneity, wages are driven by supply and demand factors that one must account for to obtain valid estimates using wage variation. The EITC unequivocally encourages single parents to work at least some hours during a year because it shifts out the budget set at all positive hours points. This first prediction is clearly confirmed by the data. In addition, theory implies that the EITC will decrease hours worked among those already working because most recipients are on the plateau or phase-out portions of the credit schedule. For these recipients, the EITC reduces or does not affect the after-tax wage while at the same time discouraging work through the income effect of the credit payment. However, recent hours-worked patterns for EITC-eligible individuals do not appear to fit this second prediction. Hours and weeks worked by likely recipient groups have not fallen. This paper analyzes this puzzling finding, building on earlier work by Nada Eissa and Jeffrey Liebman (1996) and Meyer and Dan T. Rosenbaum (1999). This study shows that nearly all of the laborsupply adjustment of single mothers occurs at the extensive margin, not the intensive margin. This finding raises the issue of what model features are needed to explain both participation and hours but leaves the answer to be provided in future work. This finding also suggests that the large literature simulating alternative policies for low-wage workers such as the EITC may be misleading because nearly all work has used models that imply similar responses on participation and hours margins.

Unemployment Insurance in the United States: Layoff Incentives and Cross Subsidies

We survey unemployment insurance (UI) in the United States and provide new evidence on the UI payroll tax. Most UI receipt is due to firms that pay part of the UI costs of their layoffs, but weak experience rating leads most firms to pay considerably less than the full costs. Industries consistently receiving subsidies from the UI system are construction, manufacturing, and mining. Finally, a large fraction of layoffs resulting in payment of UI are made by firms that are not charged for the costs of the claim because they have employed the individual for less than 2 quarters.

Five Decades of Consumption and Income Poverty

This paper examines poverty in the United States from 1960 through 2005. We investigate how poverty rates and poverty gaps have changed over time, explore how these trends differ across family types, contrast these trends for several different income and consumption measures of poverty, and consider explanations for the differences in trends. We document sharp differences, particularly in recent years, between different income poverty measures, and between income and consumption poverty rates and gaps. Moving from the official pre-tax money income measure to a disposable income measure that incorporates taxes and transfers has a substantial effect on poverty rate changes over the past two decades. Furthermore, consumption poverty rates often indicate large declines, even in recent years when income poverty rates have risen. We show that bias in the CPI-U has a sizable effect on changes in poverty. Between the early 1960s and 2005, an income poverty measure that corrects for bias in this price index declines by 14 percentage points more than a comparable measure based on the CPI-U. The patterns are very different across family types, with consumption poverty falling much faster than income poverty for single parents and the elderly, but more slowly for married couples with children. Income and consumption measures of deep poverty and poverty gaps have generally moved sharply in opposite directions in the last two decades with income deep poverty and poverty gaps rising, but consumption deep poverty and poverty gaps falling. While relative poverty rose in the early 1980s, changes in relative poverty have been fairly small since 1990. We examine the role that demographics, taxes, and transfers play in explaining changes in poverty over the past three decades. We also consider whether measurement error, saving and dissaving, and other explanations can account for income and consumption differences.

The effects of firm specific taxes and government mandates with an application to the U.S. unemployment insurance program

Abstract We examine the common, but unexamined, case of a tax or government mandate whose cost differs across firms within the same labor market. Our theoretical model shows that this variation can lead to employment reallocation across firms and dead-weight losses, even if there is no aggregate employment effect. Using firm level unemployment insurance tax data, we find that while the market level tax is mostly born by the worker, individual firms can only pass on a small share of the within market differences. Thus, in some cases differences in taxes across firms can lead to large dead-weight losses.