A Simultaneous Model of Unemployment Insurance Demand and Incidence of Unemployment Risk

摘要

The study derives models of statutory unemployment insurance provisions and average UI benefit measures and their relationship to labor market conditions. It tests the hypothesis that state unemployment benefits demanded are simultaneously determined with state total unemployment rates. Two-stage least squares estimation is applied to data on all states for the period 1964-1976. One conclusion is that maximum weekly benefits, expected potential UI benefits per spell, and qualifying earnings are positively influenced by, and in turn positively influence, state unemployment rate. Mean potential duration of benefits and average weekly benefit amounts are also simultaneously and positively affected by the expected level of unemployment risk. The results corroborate the theoretical model of insurance demand in response to risk and the presence of moral hazard arising from externalities and insufficient self-protection against unemployment.