Can Benefits Sometimes Hurt? A Look at the Relationship Between
Unemployment Insurance and the Unemployment Rate.
Matthew Witt
Mentor: Dr. John E. Lunn
Department of Economics, Management, and Accounting
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.