Experience Rating Employment Insurance Contributions

Abstract

Unless demonstrated to the contrary, the invisible hand of the price system is the most efficient means to allocate resources and maximize economic performance. This suggests experience rating of an insurance scheme for unemployment. Simulation results from a 95-sector general equilibrium model, developed especially for studying this issue, show that a move to experience rating has the potential to substantially reduce unemployment, and increase output, wage income and employment, both in aggregate terms and in most sectors of the economy.