You are hired by the presidential administration toreview the UI program, which currently replacesapproximately 45% of a worker's wages for 26weeks after she loses her job. Consider twoalternative reforms of the current Ul system. Thefirst is to experience-rate firms fully, so that thetaxes firms pay are set exactly equal to the benefitstheir workers receive (benefits remain at 45% ofwages). The second is a system of individual fullexperience rating-the government lendsindividuals 45% of their wages while unemployed,but the individuals have to pay this back when theyget new jobs.|a. Contrast the effects of these alternative policieson unemployment durations and the likelihood ofworker layoffs.b. What are the consumption-smoothingproperties of each alternative policy?

layoff refers to a temporary or permanent termination of a work contract by an employee because of…

Answered: a. Contrast the effects of these…

a. Contrast the effects of these alternative policies on unemployment durations and the likelihood of worker layoffs. b. What are the consumption-smoothing properties of each alternative policy?

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: Earnings And Discrimination

Section: Chapter Questions

Problem 8PA

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Question

You are hired by the presidential administration to
review the UI program, which currently replaces
approximately 45% of a worker's wages for 26
weeks after she loses her job. Consider two
alternative reforms of the current Ul system. The
first is to experience-rate firms fully, so that the
taxes firms pay are set exactly equal to the benefits
their workers receive (benefits remain at 45% of
wages). The second is a system of individual full
experience rating-the government lends
individuals 45% of their wages while unemployed,
but the individuals have to pay this back when they
get new jobs.
|
a. Contrast the effects of these alternative policies
on unemployment durations and the likelihood of
worker layoffs.
b. What are the consumption-smoothing
properties of each alternative policy?

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