7. Read the article by Lori G. Kletzer and Robert E. Litan, “A Prescription to Relieve Worker Anxiety,” Policy Brief 01-2

(Washington, D.C.: Peterson Institute for International Economics), available online at http://www.iie.com/publications/pb/

pb.cfm?researchid=70, which refers to the U.S. recession of 2000 and 2001. Then answer the following:

a. Under the version of Trade Adjustment Assistance (TAA) in the United States that they refer to, how many extra weeks of unemployment insurance are workers eligible for? What two criteria must workers meet to qualify for this extra unemployment insurance?

b. Consider the proposal for “wage insurance”

that Kletzer and Litan make in their article.

What criteria would workers need to qualify for this insurance? What amount of extra income would they receive from the insurance?

c. If Kletzer and Litan’s new plan for “wage insurance” had been adopted by the United States, what would have been the budgetary cost in 1999, when unemployment was 4.2%? How does this compare with the amount that is now spent on unemployment insurance?