Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216429 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13117
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
To finance unemployment insurance, states raise payroll tax rates on employers who engage in layoffs. Tax rates are, therefore, highest for firms after downturns, potentially hampering labor-market recovery. Using full-population, administrative records from Florida, I estimate the effect of these tax increases on firm behavior leveraging a regression kink design in the tax schedule. Tax hikes reduce hiring and employment substantially, with no effect on layoffs or wages. The results imply unanticipated costs of the financing regime which reduce the optimal benefit by a quarter and account for twelve percent of the unemployment in the wake of the Great Recession.
Subjects: 
unemployment insurance
payroll taxes
recession
JEL: 
D22
H22
H25
H71
J23
J32
J38
J65
Document Type: 
Working Paper

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