Employer tax evasion in the unemployment insurance program

Arthur Blakemore, Paul L. Burgess, Stuart A. Low, Robert St Louis

Research output: Contribution to journalArticlepeer-review

17 Scopus citations


We use unique data to analyze employer tax compliance with Unemployment Insurance (UI) provisions. The data indicate that employers may have underreported $728 million of UI taxes nationally in 1987 alone. To formally examine this noncompliance, a theoretical model of payroll tax evasion is developed showing that increasing payroll tax rates, among other things, likely increases noncompliance by risk-neutral firms. This prediction is empirically verified. The finding that UI tax evasion is systematically related to various firm characteristics suggests that UI audits may be effectively targeted by statistical profiles derived from our model, thereby improving compliance.

Original languageEnglish (US)
Pages (from-to)210-230
Number of pages21
JournalJournal of Labor Economics
Issue number2
StatePublished - Apr 1996

ASJC Scopus subject areas

  • Industrial relations
  • Economics and Econometrics


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