| The Unemployment Insurance (UI) system was initiated as part of the 1935 Social Security Act to guard employees from income loss resulting from unanticipated and involuntary detachment from employment. The presence of UI benefits creates a moral hazard problem. Thus, the UI system is faced with the problem of providing sufficient protection from income losses due to involuntary work interruptions without providing benefits to an extent that produces substantial disincentives to work.; This dissertation consists of two studies that focus on the disincentives to work associated with the UI system. The first study uses claimant data from the Kentucky Department of Employment Services during the period of the Extended Unemployment Act, 1991 through 1993, to examine how the length of time that claimants may receive benefits affects the empirical hazard function. This study differs from previous research by implementing a quasi-experiment approach that examines claimants from the same state who file for benefits at the same point in time who are subject to different potential benefit lengths. Results from this analysis of claimants' responses to policy changes in UI benefit length suggest that as the time that claimants may receive benefits increases, there is a substantial reduction in the empirical hazard function. In other words, more generous benefit levels are associated with longer spells of unemployment.; The second study examines the effects of the recently adopted Worker Profiling and Reemployment Services (WPRS) initiative on claimants' number of weeks of benefit receipt and earnings in the year subsequent to the UI claim using data from a prototype state, Kentucky. This provides an evaluation of whether the program successfully reemploys workers more quickly, suggesting a reduction in the moral hazard associated with UI benefits. The results from the evaluation of the WPRS program suggest that treatment in the form of reemployment services can reduce this moral hazard problem. Specifically, treated claimants received fewer weeks of benefit receipt and fewer benefit amounts than untreated claimants. Thus, it appears that the WPRS program is successful at identifying workers with potentially long spells and helping them find reemployment more quickly. |
