The study derives a model of the unemployment insurance (UI) system and its relationship to the labor market, estimates it with data from the Detroit Standard Metropolitan Statistical Area, and evaluates its potential use to forecast UI benefit amounts, UI insured unemployment, and UI exhaustions. It further uses the model to analyze policy issues relating to UI and to simulate alternative UI systems which could be created by revising the provisions of the existing UI system. A set of seven recursive equations links the UI policy variables to the variables which represent supply and demand in the labor market, with special attention being given to the specification of the pivotal equations for insured unemployment and UI exhaustions. An analysis of these equations indicates that the chances of a worker finding a job diminish rapidly the longer the worker has been unemployed, and that UI leads to a small increase in the average duration of unemployment, but that the increase has only a small effect on the aggregate unemployment rate. Five alternative UI systems are simulated, each created by revising one of the key provisions of the existing law. The simulations are related to the determination of optimal UI policies. (Author/JR)