Premium Essay

Finance Effects by Increasing Unemployment Benefit Financed by Increasing in Taxation

In: Business and Management

Submitted By gchen03
Words 5284
Pages 22
Economic Effects of the Unemployment Insurance Benefit
Business Review Shigeru Fujita July 30, 2010

The views expressed here are those of the author and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. This article is forthcoming in an issue of the Federal Reserve Bank of Philadelphia’s Business Review.

overall economy itself has started to grow again after the deep recession. For example, in the fourth quarter of 2009, the average unemployment rate was at a insurance. double-digit level, a level we have not seen since the early 1980s, even though real GDP grew by more than 5 percent. One of the main policy reactions to painful developments in the labor market has been the expansion of unemployment components of the social security programs in the U.S. 1 It provides income (and thus

The U.S. labor market has remained weak in recent years, even though the

consumption) protection for those who have lost their jobs involuntarily. During “normal” times, unemployment insurance benefits are provided through the regular pre-unemployment earnings and last 26 weeks in the majority of states. 2 During

The unemployment insurance (UI) system constitutes one of the major

economic downturns, however, the federal government often provides additional government has greatly extended the duration of benefits as a means to combat the surmounting joblessness. As of the summer of 2009, unemployed workers who

unemployment compensation (UC) program, which is funded and administered at

support by extending UI benefits. Especially in the last few years, the U.S. reside in states with a relatively high unemployment rate are entitled to receive UI
The original framework of the unemployment compensation system is contained in the Social Security Act, which was signed into law by President Franklin...

Similar Documents

Premium Essay

International Case Study - Ireland and the Eu Treaty

...of the EU but the major economic issue still facing Ireland is the unemployment rate which currently sits at over 14 per cent. Signing this EU treaty will impose tighter fiscal discipline on members by entrenching tougher tax regulations and limiting government spending (Halpin 2012). The overall aim of the treaty is based on the Keynesian theory of using monetary policy to create budget surplus. EU countries will reduce their budget deficits by the strict spending regulations outlined in the treaty. The downside to signing the treaty is the lack of control Ireland will have over the country. The primary avenue for government spending will be limited to tax increases. Ireland has been criticised for having one of the lowest personal and company tax rates in the EU. The benefit of the low corporate tax rate is the large foreign multinational corporations that create employment in Ireland. Increasing taxes could have a negative effect on the economy. If Ireland do not sign the treaty, although they will still be a member of the EU they will not be entitled to further financial assistance from the European Stability Mechanism (ESM) bailout fund which may be an issue. The Government are presently claiming they will not require further bail out. This paper recommends that Ireland does not sign the EU treaty. Ireland should focus in the short term on fiscal policies. Specific recommendations include increasing...

Words: 3146 - Pages: 13

Premium Essay

Fiscal Deficit

...Government Operations          Timing of the Impact of Fiscal Transactions          Defining the "Overall Fiscal Balance"How Much Fiscal Adjustment Is Required?     A Framework for Fiscal Adjustment     Determining the Amount of Fiscal Adjustment          Reducing the Fiscal Deficit          Quality of AdjustmentHow Should Fiscal Adjustment Be Effected?     Measures to Improve the Tax System and Increase Revenue          Characteristics of a Desirable Tax System          Design of Major Taxes     Rationalization of Expenditure Policies          Expenditure Reduction in the Short Run          Structural Public Expenditure ReformReferencesBoxes1. Adverse Consequences of Excessive Fiscal Expansion for Growth2. The Exchange Rate Effects of Fiscal Policy3. Quasi-Fiscal Activities of Public Financial Institutions4. When Should a Country Run a Fiscal Surplus?5. Technical Assistance for Growth6. Social Safety Nets7. Reforming Tax Administration8. The Budget and Expenditure...

Words: 15497 - Pages: 62

Premium Essay

Scandinavian Model

... 3rd year student 2011 Table of contents Introduction 3 Chapter 1. The role of Scandinavian model in economic theory and practice. 5 1.1. Scandinavian model in civilizational context: incarnation of integralism. 5 1.2. Scandinavia in European economy: comparative analysis 10 1.3. Cultural preconditions for the Scandinavian model formation. 13 Chapter 2. Model performance and competitiveness: distinctive features 16 2.1. The role of public sector in Scandinavian economies 16 2.2. Peculiarities of labour market in Scandinavia 21 2.3. Human capital and innovations: learning economy 26 Chapter 3. Scandinavian model: challenges and threats 33 3.1. Demographic challenge: ageing of population versus public finance 33 3.2. Paradoxes of economic growth in welfare states 36 3.3. The problem of labour disincentives and decommodification. 38 Conclusion 41 Bibliography 43 Introduction In the light of a current trend of moving towards socialization in economy, Scandinavian experience stands out, being probably a unique example of building a highly-socialized and at the same time viable economy. The image of Scandinavian countries appears to be controversial in modern economic observations. On the one hand, obviously, the Scandinavians’ performance is ranked high in terms of the majority of competitiveness indicators. The main advantages of the Scandinavian economies are, probably, a peaceful labour market and an egalitarian income......

Words: 11148 - Pages: 45

Free Essay

A Business Essay

...WIDERhelsinki Chapters 1, 2 and 12 of August 2003 New Sources for Development Finance edited by A B Atkinson, Nuffield College, OXFORD Contents Chapter 1 Innovative Sources for Development Finance by A B Atkinson Over-Arching Issues By A B Atkinson Global Public Economics by J A Mirrlees National Taxation, Fiscal Federalism and Global Taxation by R Boadway* Environmental Taxation and Revenue for Development by A Sandmo* Revenue Potential of the Tobin Tax for Development Finance: A Critical Appraisal by M Nissanke* A Development-Focused Allocation of the Special Drawing Rights by E Aryeetey* The International Finance Facility Proposal by G Mavrotas* Private Donations for International Development by J Micklewright and A Wright* A Global Lottery and a Global Premium Bond by T Addison and A Chowdhury* Remittances by Emigrants: Issues and Evidence by A Solimano* The Way Forward by A B Atkinson Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 * These chapters are available on the WIDER website. Chapter 1 Innovative Sources for Development Finance 1 A B Atkinson, Nuffield College, Oxford Introduction 1 Innovative Sources to Meet a Global Challenge 2 New Development Finance: Innovative Sources 3 Origins of the Proposals 4 Political Economy 5 Criteria for Evaluation 6 Guide to the Contents of the Book Box 1 The Millennium Development Goals Box 2 Innovative Sources of Development Funding Considered Here...

Words: 20039 - Pages: 81

Premium Essay

Вращение льда в горячей воде

...IM Aggregate Demand Aggregate demand (AD) is the total demand for all goods and services produced in an economy in a given price level and time period. AD = C + G + I + (X – M) C means consumer expenditure. This makes up the majority of AD in most countries (about 65% of the total). I means investment in capital goods from firms, and this is the most volatile component of AD. This typically accounts for 15-20% of GDP, and the majority (75%) is from private sector businesses. G means government spending on state-provided goods and services. Transfer payments (state benefits) do not count because these payments are not producing an output – they are a transfer of money from one group to another. X means exports; M means imports. Exports are goods sold to overseas countries and imports are what the UK buys from foreign countries. (X – M) represents net exports. If this is positive, there is a trade surplus which adds to AD. Conversely, a negative net exports value means there is a trade deficit, which reduces AD. Consumer Expenditure Consumer expenditure is influenced by… The amount of real disposable income is the main influence on consumer expenditure. Households and economies with more disposable income tend to spend more in total than poorer ones. The proportion of income that is spent is called the average propensity to consume (APC). Wealth (the value of a stock of assets) affects C. Wealthier people tend to spend more. Wealth can be spent and can be......

Words: 11608 - Pages: 47

Free Essay

Fiscal Policy Administration

...idea of government expansion and the underlying concepts provide some explanations as to the pattern and growth of our government. Adolph Wagner a 19th century German political economist. Who made one of the earliest attempts to explain public sector growth. Observe the tendency of the public sector in a number of industrialize countries such as Britain, USA, France, Germany, etc. to grow, both absolutely and relative to the rest of the economy. He predicted a public sector that would grow continuously, and considered society’s economic and social structure as factors that influenced this continuous growth. Wagner’s prediction was called the “law of increasing public and particularly state activities” or the “Wagner’s Law”. The equation below shows Wagner’s presumption that the existence of a functional cause and effect relationship between growth of an economy and the relative growth of its public sector. RPCOPG1 RPCOPG2 ____________ < _____________ RCPI1 RCPI2 He postulated that as per capita income and...

Words: 3839 - Pages: 16

Premium Essay

Bases of Economics

...Economics GDP: it’s the market value of the final goods and services newly produced in a fixed period of time within the geographic boundaries of a country. Fundamental Identity: GDP=total production=total expenditure=total income (wages+profits) Expenditure Approach (supply=demand): Y= C+I+G+NX (G= government purchase, that is different from public expenses, because government spending includes also transfers). What happens if price rise over time? Also if the quantity of the output does not increase the GDP seems to increase (price x quantity). To overcome this problem we need to distinguish between real GDP and nominal GDP. Economists calculate real output by using for every year the same constant price as weights. GDP (y1) = Q(1) x P(0) we are using year 0 as base year, and we use this year also for the next years. However in this way we don’t take into account the added value of technologies, in fact, as the computer industry, pc have raising price because they became better in the years. For this reason government to calculate GDP started to use “chain weight”. It means calculate the growth for example between the year 3 and 4, by using Y3 prices and by using Y4 prices and taking a geometric average. Different indexes: 1. Laspeyres Index: initial period prices 2. Paasche Index: final period prices 3. Fisher Index: Geometric average (GDP uses a chained Fisher Index) Fisher index is useful because it deals with substitution bias and it eliminates...

Words: 6862 - Pages: 28

Premium Essay

The Uk Economy

...| |[pic] | | | | | | | | | | | | | | |UNIT NO | | |DM4X 10 | | | | | |UNIT TITLE | | |OUTCOME 2 | | |THE UK ECONOMY | | | | | ...

Words: 4434 - Pages: 18

Premium Essay

Keynesian Approach to Stabilisation

...recession, it would be the fault of suppliers providing goods that people did not want. Prices would fall, and suppliers would smarten up. Meanwhile, any unemployment would cause wages to be bid down.. The lower wages would make hiring look attractive, and the unemployed would be re-hired. Yes, if employers reduce their demand for labour, the wage will drop. This however will not change the fact that fewer people are employed than before. More people are hired than if demand had dropped and the wage had not responded, but the fact is, not as many people are hired as before. The labour market does not completely self-correct as wishfully assumed in Figure 14-1. It will not completely correct until labour demand rises back to its original level; this will happen when whatever caused the reduced labour demand is resolved. Figure 14-1. Classical View: Market Self-Correction. Note: It is useful to think of classical economists as assuming that Aggregate Demand is perfectly flexible or elastic. Consequently, only supply drives the economy. As we shall see below, Keynes makes the opposite assumption. Keynes’ reaction to the classical view John Maynard Keynes, an economist active in the 1920s, 30s, and 40s, observed that the labour was not self-correcting. The Great Depression, begun in 1929, dragged on. Unemployment was persisting. Prices and wages were not falling to "clear the market" and get everyone/everything working again. Keynes ran out of......

Words: 3086 - Pages: 13

Premium Essay


...Managing Partner at the EBRD, IE Business School and Altura Advisers. Email: Comments should be addressed by email to the author(s). 1 Thanks to Jeni Klugman for discussion and comments and to Ginette Azcona for help with data. Abstract The paper looks at the experience of advanced economies in dealing with employment volatility. It examines in detail the impact of labour market institutions on equilibrium unemployment and the p ossible le ssons f or e merging ma rket e conomies tr ying to d esign p olicy f or d ealing w ith unemployment and a wider, growing demand for social protection from their citizens. Part of the paper concentrates on t he t ransition e conomies whose i nstitutional c ontext m ay b e r elevant t o other emerging ma rkets. S ome leading principles in policy d esign a re elaborated th at take into account s ome o f t he co mmon f eatures o f em erging m arkets, n otably a p rotected p ublic s ector, large informal sectors and weak institutions. Keywords: employment, unemployment, labour market, emerging markets, social protection JEL Classifications: H53, J21, J65, J68 The H uman D evelopment R esearch P aper ( HDRP) S eries i s a m edium f or s haring recent research c ommissioned t o i nform t he g lobal H uman D evelopment R eport, w hich i s publ...

Words: 19075 - Pages: 77

Premium Essay

How Economists Think

...WEEK 1: HOW ECONOMISTS THINK * What are preferences? Preferences refer to all of the objectives an individual wants to achieve that might motivate a choice among a set of alternatives. * What does it mean for an individual’s preferences to be rational? Please explain the concepts of costs and benefits and the reasoning process used by a rational individual. A rational individual will try to make the best possible use of his/her scarce resources, usually choosing an activity that has the highest utility. Rational preferences possess 2 properties, which are completeness and transitivity. Completeness means that choices can be ranked in an order of preference. For instance, an individual will have a preference when faced with two choices. Transitivity means actions can be compared with other actions. As an example, if action a is preferred to b, and action b is preferred to c, then a is preferred to c. A benefit is the maximum unit of currency amount you would be willing to pay to do x, while the cost is the value of all the resources you must give up in order to do x. The cost-benefit approach to decisions states that an individual should do an activity x if the benefit exceeds the cost. Relating to cost, in the process of coming up with a decision, a rational individual will take into account opportunity costs and ignore sunk costs. * New theories argue that people are not always rational. On what grounds? What are the implications for Policy......

Words: 22938 - Pages: 92

Premium Essay

Economic Principals

...AN INTRODUCTION TO ECONOMICS IN 5,000 WORDS Authors Note. Many years ago when I was doing research as a Visiting Associate Member at St. Antony’s College, Oxford, I shared a house with several grad students from various different disciplines who were studying for their D.Phil. I was struck by the number who asked me what economics was about and would I please write an elementary book some day, so that an intelligent and welleducated person could learn about it. I never forgot. This article is a simple introduction to the discipline, or at least as simple as I can make it. Economics courses tend to contain a lot of mathematics or a lot of diagrams, or both. This article uses neither. It might be useful to you if you are similarly intellectually curious; or if you are just starting a course in economics and looking for an easy overview; or perhaps are contemplating studying the subject and wondering what the heck you might be getting into. If the article interests you and you would like to learn more, please check out the link at the end. This takes you to a free book of economics notes that sticks to using diagrams (lots!), with only the tiniest bit of algebra in one small section. The notes explain this article in more detail. Not counting these notes, I have written 5 books, the latest of which is Going to University: the Secrets of Success, Exposure Publishing, UK, 2007. This is designed to help sixth formers (grades 11-12) and assist you to adjust quickly and easily to...

Words: 5089 - Pages: 21

Premium Essay

Structure and Performance of National Economies and the Policies That Governments Use to Try to Affect Economic Performance: China

...INTRODUCTION The objective of this mini project is the study the structure and performance of national economies and the policies that governments use to try to affect economic performance. Important topics in this mini project include the determinants of long-run economic growth, unemployment, inflation, and macroeconomic policy. In addition, this mini project are also able us to know the measurement of the standard living of a country in term of productivity, efficiency and effectiveness. Besides that, we are also able to determine what is measured by Gross Domestic Product, Inflation and etc as well as know how the government policy could contribute to improved productivity of the country. The picture below shows the brief idea how does Indonesia looks like. Picture 1: Tourism in Indonesia’s island Picture 2: Place to travel in Indonesia Picture 3: City in Indonesia Picture 4: Map of Indonesia Choose one country of the world The chosen country was Indonesia. The reason of Indonesia been chosen because Indonesia is given public an image that Indonesia is a lag behind country than other since there was a tragic event happened in Indonesia in the middle of 1997 all along. This causing Indonesian suffered a great deal and many of them have experienced a very large decline in their living standard. It was irony in Indonesia’s case seen a......

Words: 8104 - Pages: 33

Premium Essay

The Economic Benefits of Environmental Policy

...The economic benefits of environmental policy A project under the Framework contract for economic analysis ENV.G.1/FRA/2006/0073 - 2nd FINAL REPORT November 2009 Matt Raymenta, Elke Pirgmaierb, Griet De Ceusterc, Friedrich Hinterbergerb, Onno Kuikd, Henry Leveson Gowera, Christine Polzinb, Adarsh Varmaa a b c d GHK Sustainable Europe Research Institute (SERI) Transport & Mobility Leuven VU University Amsterdam, Institute for Environmental Studies (IVM) Institute for Environmental Studies Vrije Universiteit De Boelelaan 1087 1081 HV AMSTERDAM The Netherlands Tel. ++31-20-5989 555 Fax. ++31-20-5989 553 E-mail: Internet: vrije Universiteit amsterdam Contents Executive Summary 1. 2. 3. 3.1 3.2 3.3 3.4 3.5 3.6 4. 4.1 4.2 4.3 4.4 4.5 4.6 5. 5.1 5.2 5.3 5.4 5.5 5.6 6. 6.1 6.2 6.3 6.4 6.5 6.6 7. 7.1 7.2 7.3 7.4 7.5 8. 8.1 Introduction Environmental Policy and the Economy Environmental Policies and Productivity Description and background Policy instruments Review of evidence from the wider literature Evidence from examples and case studies Scale of economic benefits to date and assessment of the further potential Beneficiaries and timescale Environmental Policies and Innovation Description and background Policy instruments Review of evidence Examples and case studies Scale of economic benefits Beneficiaries and timescale Environmental Policies and Employment Description and background Policy instruments Review of evidence......

Words: 78697 - Pages: 315

Premium Essay


...WORKBOOK ANSWERS AQA A2 Economics Unit 3 Business Economics and the Distribution of Income This Answers book provides answers for the questions asked in the workbook. They are intended as a guide to give teachers and students feedback. The candidate responses supplied here for the longer essay-style questions are intended to give some idea about how the exam questions might be answered. The examiner commentaries (underlined text) have been added to give you some sense of what is rewarded in the exam and which areas can be developed. Again, these are not the only ways to answer such questions but they can be treated as one way of approaching questions of these types. Topic 1 The firm: objectives, costs and revenues 1 Both private and public companies are privately owned capitalist business enterprises. The difference stems from their ownership. Private companies are owned by private shareholders who can choose the buyer of their shares. Public company shares are listed on the stock market, which means that they have to comply with the rules of the stock market and any member of the public can buy shares in the company. 2 An excess of sales receipts over the spending of a business during a period of time, which can be calculated using the formula: profit = revenue – costs. 3 At any level of output, revenue is calculated by multiplying output by the price at which each unit of output is sold. In perfect competition, because it is always possible to......

Words: 13736 - Pages: 55