Can Benefits Sometimes Hurt? A Look at the Relationship Between Unemployment Insurance and the Unemployment Rate
Dr. John Lunn, Hope College
This paper tries to establish if Unemployment Insurance (UI) has any type of effect on the unemployment rate. Many have suggested that extending UI to those out of work will have no adverse effect on the unemployment rate, while the exact opposite has also been claimed many times. For this project I decided to see if I could establish if there was indeed any relationship between UI and the unemployment rate. I ended up using a regression analysis using the 50 different states plus District of Columbia as my observations. I used two separate independent variables to measure the amount of benefits given out. These two variables were used because they differentiate from state to state and because their quantities were not caused by the unemployment rate. My findings show that while there is not enough evidence to conclude that the amount paid out to those eligible for benefits affect the unemployment rate, the number of weeks a state allows you to collect the Insurance does show a statistically significant correlation, although we cannot deem there to be a causation effect.
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