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Supply Side Hysterisis: The Case of the Canadian Unemployment InsuranceSystem

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  • Thomas Lemieux
  • W. Bentley MacLeod

Abstract

This paper presents results from a 1971 natural experiment carried out by the Canadian government on the unemployment insurance system. At that time, they dramatically increased the generosity of the system. We find that the propensity to collect UI increases with a first time exposure to the system. Hence as more individuals experience unemployment their lifetime use of the system increases. This supply side hysterisis effect may explain why unemployment has steadily increased over the 1972 - 1992 period, even though the generosity of unemployment insurance did not.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6732.

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Date of creation: Sep 1998
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Publication status: published as Lemieux, Thomas and W. Bentley MacLeod. "Supply Side Hysteresis: The Case Of The Canadian Unemployment Insurance System," Journal of Public Economics, 2000, v78(1-2,Oct), 139-170.
Handle: RePEc:nbr:nberwo:6732

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  7. Thomas Lemieux & W. Bentley MacLeod, 1997. "Supply Side Hysteresis: The Case of the Canadian Unemployment Insurance System," Boston College Working Papers in Economics 340., Boston College Department of Economics.
  8. Green, David A & Riddell, W Craig, 1993. "The Economic Effects of Unemployment Insurance in Canada: An Empirical Analysis of UI Disentitlement," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages S96-147, January.
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Cited by:
  1. Thomas Lemieux & W. Bentley MacLeod, 1997. "Supply Side Hysteresis: The Case of the Canadian Unemployment Insurance System," Boston College Working Papers in Economics 340., Boston College Department of Economics.
  2. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2008. "Learning in the Credit Card Market," NBER Working Papers 13822, National Bureau of Economic Research, Inc.
  3. Johannes F. Schmieder & Till von Wachter & Stefan Bender, 2011. "The Longterm Effects of UI Extensions on Employment," Boston University - Department of Economics - Working Papers Series WP2011-064, Boston University - Department of Economics.
  4. Dagenais, M. & Mohnen, P. & Therrien, P., 1997. "Do Canadian Firms Respond to Fiscal Incentives To Research and Development?," G.R.E.Q.A.M. 97b05, Universite Aix-Marseille III.
  5. Martin Ljunge, 2012. "The Spirit of the Welfare State? Adaptation in the Demand for Social Insurance," Journal of Human Capital, University of Chicago Press, vol. 6(3), pages 187 - 223.
  6. Bjorn, Gustafsson & Gustafsson, Bjorn & Osterberg, Torun & Corak, Miles, 2001. "Intergenerational Influences on the Receipt of Unemployment Insurance in Canada and Sweden," Analytical Studies Branch Research Paper Series 2001159e, Statistics Canada, Analytical Studies Branch.
  7. Kuhn, Peter J. & Riddell, Chris, 2006. "The Long-Term Effects of a Generous Income Support Program: Unemployment Insurance in New Brunswick and Maine, 1940-1991," IZA Discussion Papers 1919, Institute for the Study of Labor (IZA).
  8. Kroft, Kory, 2008. "Takeup, social multipliers and optimal social insurance," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 722-737, April.
  9. Jean-Baptiste Michau, 2009. "Unemployment insurance and cultural transmission: theory and application to European unemployment," LSE Research Online Documents on Economics 28605, London School of Economics and Political Science, LSE Library.
  10. Chen, Wen-Hao & Corak, Miles, 2005. "Entreprises, industries et assurance-chomage : une analyse des donnees sur les employeurs et les employes recueillies au Canada," Direction des etudes analytiques : documents de recherche 2005260f, Statistics Canada, Direction des etudes analytiques.
  11. Corak, Miles & Chen, Wen-Hao, 2003. "Firms, Industries, and Unemployment Insurance: An Analysis Using Employer-Employee Data," IZA Discussion Papers 811, Institute for the Study of Labor (IZA).

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