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Supply Side Hysterisis: The Case of the Canadian Unemployment InsuranceSystem

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Thomas Lemieux
W. Bentley MacLeod

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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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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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Handle: RePEc:nbr:nberwo:6732

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Find related papers by JEL classification:
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March. [Downloadable!] (restricted)
  2. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July. [Downloadable!] (restricted)
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  3. Blanchard, Olivier & Jimeno, Juan F, 1995. "Structural Unemployment: Spain versus Portugal," American Economic Review, American Economic Association, vol. 85(2), pages 212-18, May. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
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  5. Miles Corak, 1993. "Unemployment Insurance Once Again: The Incidence of Repeat Participation in the Canadian UI Program," Canadian Public Policy, University of Toronto Press, vol. 19(2), pages 162-176, June. [Downloadable!] (restricted)
  6. Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, vol. 73(4), pages 541-59, September. [Downloadable!] (restricted)
  7. A. S. Yelowitz, . "Did recent medicaid reforms cause the caseload explosion in the food stamp program?," Institute for Research on Poverty Discussion Papers 1109-96, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
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  8. Bloom, H. & Fink, B. & Lui-Gurr, S. & Bancroft, W. & Tattrie, D., 1997. "Implementing the Earnings Supplement Project: A Test of a Re-employment Incentive," Papers r-98-1a, Gouvernement du Canada - Human Resources Development.
  9. Bruce D. Meyer & Dan T. Rosenbaum, . "Repeat Use of Unemployment Insurance," IPR working papers 95-24, Institute for Policy Resarch at Northwestern University.
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  10. Lindbeck, Assar, 1995. " Welfare State Disincentives with Endogenous Habits and Norms," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(4), pages 477-94, December.
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  11. Katz, Lawrence F & Meyer, Bruce D, 1990. "Unemployment Insurance, Recall Expectations, and Unemployment Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 973-1002, November. [Downloadable!] (restricted)
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  12. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 225-38, January. [Downloadable!] (restricted)
  13. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 5-33, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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). [Downloadable!]
  2. Bjorn, Gustafsson & Corak, Miles & Gustafsson, Bjorn & Österberg, Torun, 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. [Downloadable!]
    Other versions:
  3. Marcel Dagenais & Pierre Mohnen & Pierre Therrien, 1997. "Do Canadian Firms Respond to Fiscal Incentives to Research and Development?," CIRANO Working Papers 97s-34, CIRANO. [Downloadable!]
    Other versions:
  4. Peter Kuhn & Chris Riddell, 2006. "The Long-Term Effects of a Generous Income Support Program: Unemployment Insurance in New Brunswick and Maine, 1940-1991," NBER Working Papers 11932, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Jean-Baptiste Michau, 2009. "Unemployment Insurance and Cultural Transmission: Theory and Application to European Unemployment," CEP Discussion Papers dp0936, Centre for Economic Performance, LSE. [Downloadable!]
  6. W. Bentley MacLeod, 2005. "Regulation or Markets? The Case of Employment Contract," IEPR Working Papers 05.17, Institute of Economic Policy Research (IEPR). [Downloadable!]
  7. 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. [Downloadable!] (restricted)
    Other versions:
  8. Corak, Miles & Chen, Wen-Hao, 2005. "Entreprises, industries et assurance-chômage : une analyse des données sur les employeurs et les employés recueillies au Canada," Direction des études analytiques : documents de recherche 2005260f, Statistics Canada, Direction des études analytiques. [Downloadable!]
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