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Effect of unemployment insurance tax on wages and reallocation of labour

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  • Deergha Raj Adhikari
  • Wayne Everson
  • Lynn Gray

Abstract

We develop a labour market equilibrium model and show how the federally collected Unemployment Insurance (UI) Tax affects labour force allocation between regular labour and contract labour. We also analyse the effect of UI tax on wages of the two types of labour. Our model suggests that the effect of a UI tax will be to increase the employment and wages of contract labour and to reduce the employment and wages of regular labour.

Suggested Citation

  • Deergha Raj Adhikari & Wayne Everson & Lynn Gray, 2009. "Effect of unemployment insurance tax on wages and reallocation of labour," Applied Economics Letters, Taylor & Francis Journals, vol. 16(2), pages 147-150.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:2:p:147-150
    DOI: 10.1080/13504850601018247
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    References listed on IDEAS

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    1. Patricia M. Anderson & Bruce D. Meyer, "undated". "The Incidence of a Firm-Varying Payroll Tax: The Case of Unemployment Insurance," IPR working papers 95-23, Institute for Policy Resarch at Northwestern University.
    2. Anderson, Patricia M. & Meyer, Bruce D., 1997. "The effects of firm specific taxes and government mandates with an application to the U.S. unemployment insurance program," Journal of Public Economics, Elsevier, vol. 65(2), pages 119-145, August.
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    Cited by:

    1. Xinxin Ma & Jie Cheng, 2020. "The Impact of Social Insurance Contributions on Firms Employment and Wages: Evidence from China Employer-Employee Matching Survey Data," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(1), pages 42-60, March.
    2. Xinxin Ma & Dongyang Zhang, 2018. "The Incidence of Social Security Payroll Taxes: Evidence From China," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(4), pages 1-18, October.

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