Unemployment insurance and firms´ profitability - the impact of unemployment insurance costs

Abstract

This paper analyzes the effects of unemployment insurance benefits on firms’ profitability and the impact of unemployment insurance costs and labor productivity changes in this relation. Using panel regression analysis with data from heterogeneous firms across multiple industries and US states, we find that there is no statistically significant relation between unemployment subsidies and firms’ profitability, except when we narrow our analysis to specific industries or dimensions. Additionally, our findings suggest a negative significant impact of firms’ costs with unemployment insurance benefits on profitability.