Question
You are asked to consider two alternative reforms of the current UI system. The first is to experience-rate all firms fully, so that the taxes
You are asked to consider two alternative reforms of the current UI system. The first is to experience-rate all 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. Contrast the effects of these alternative policies on unemployment durations and the likelihood of worker layoffs.
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