Unemployment Insurance and Labor Force Transitions

This paper reports preliminary estimates of an econometric simulation model capable of a comprehensive evaluation of the effects of unemployment insurance on measured and actual employment, unemployment and non-participation. The data are longitudinal comprising information on 75,000 households sampled in the Current Population Surveys of March and April 1978. The simulation model is constructed from multi- nomial logit equations characterizing individuals' labor force transitions. These equations provide estimates of the effects of UI on job loss, labor force exit, and entry into the labor force, as well as the effect of UI on unemployment duration and temporary layoffs. The results are rather inconclusive, but suggest the importance of further research on I21 and transitions in and out of the labor force.