UNEMPLOYMENT-INSURANCE TAKEUP RATES AND THE AFTER-TAX VALUE OF BENEFITS

The recent decline in the unemployment insurance (UI) takeup rate has puzzled researchers. Using administrative data with accurate informati on on the potential level and duration of benefits, we examine whether a separating employee receives UI. We find a strong positive effect o f the benefit level on takeup, and smaller effects of the potential du ration and the tax treatment of benefits. Simulations indicate that th e recent inclusion of UI in the income tax base can account for most o f the previously unexplained decline in UI receipt.