IDEAS home Printed from https://ideas.repec.org/p/boc/bocoec/340.html
   My bibliography  Save this paper

Supply Side Hysteresis: The Case of the Canadian Unemployment Insurance System

Author

Listed:
  • Thomas Lemieux

    (Universite de Montreal)

  • W. Bentley MacLeod

    (Boston College)

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 hysteresis effect may explain why unemployment has steadily increased over the 1972-1992 period, even though the generosity of unemployment insurance did not.

Suggested Citation

  • 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.
  • Handle: RePEc:boc:bocoec:340
    as

    Download full text from publisher

    File URL: http://fmwww.bc.edu/EC-P/wp340.pdf
    File Function: main text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    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.
    2. David Card & W. Craig Riddell, 1993. "A Comparative Analysis of Unemployment in Canada and the United States," NBER Chapters,in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 149-190 National Bureau of Economic Research, Inc.
    3. Lawrence F. Katz & Bruce D. Meyer, 1990. "Unemployment Insurance, Recall Expectations, and Unemployment Outcomes," The Quarterly Journal of Economics, Oxford University Press, vol. 105(4), pages 973-1002.
    4. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    5. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 325-353, July.
    6. Blanchard, Olivier & Jimeno, Juan F, 1995. "Structural Unemployment: Spain versus Portugal," American Economic Review, American Economic Association, vol. 85(2), pages 212-218, May.
    7. 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 96-147, January.
    8. 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.
    9. Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, vol. 73(4), pages 541-559, September.
    10. A. S. Yelowitz, "undated". "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.
    11. Lemieux, Thomas & MacLeod, W. Bentley, 2000. "Supply side hysteresis: the case of the Canadian unemployment insurance system," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 139-170, October.
    12. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    13. 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.
    14. Bruce D. Meyer & Dan T. Rosenbaum, "undated". "Repeat Use of Unemployment Insurance," IPR working papers 95-24, Institute for Policy Resarch at Northwestern University.
    15. Lindbeck, Assar, 1995. " Welfare State Disincentives with Endogenous Habits and Norms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 477-494, December.
    16. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211-211.
    17. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
    18. Heckman, James J & Borjas, George J, 1980. "Does Unemployment Cause Future Unemployment? Definitions, Questions and Answers from a Continuous Time Model of Heterogeneity and State Dependence," Economica, London School of Economics and Political Science, vol. 47(187), pages 247-283, August.
    19. 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.
    20. Farber, Henry S, 1994. "The Analysis of Interfirm Worker Mobility," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 554-593, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    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).
    2. Corak, Miles & Gustafsson, Björn Anders & Österberg, Torun, 2000. "Intergenerational Influences on the Receipt of Unemployment Insurance in Canada and Sweden," IZA Discussion Papers 184, Institute for the Study of Labor (IZA).
    3. 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.
    4. MacLeod, W Bentley, 2016. "Human capital: Linking behavior to rational choice via dual process theory," Labour Economics, Elsevier, vol. 41(C), pages 20-31.
    5. Johannes F. Schmieder & Till von Wachter & Stefan Bender, 2012. "The Long-Term Effects of UI Extensions on Employment," American Economic Review, American Economic Association, vol. 102(3), pages 514-519, May.
    6. Jean-Baptiste Michau, 2013. "Unemployment Insurance And Cultural Transmission: Theory And Application To European Unemployment," Journal of the European Economic Association, European Economic Association, vol. 11(6), pages 1320-1347, December.
    7. Lemieux, Thomas & MacLeod, W. Bentley, 2000. "Supply side hysteresis: the case of the Canadian unemployment insurance system," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 139-170, October.
    8. Johannes F. Schmieder & Till M. von Wachter & Stefan Bender, 2012. "The Long-Term Effects of Unemployment Insurance Extensions on Employment," NBER Working Papers 17814, National Bureau of Economic Research, Inc.
    9. 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.
    10. Sumit Agarwal & John C Driscoll & Xavier Gabaix & David Laibson, 2008. "Learning in the Credit Card Market," Levine's Working Paper Archive 122247000000002028, David K. Levine.
    11. 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.
    12. Kroft, Kory, 2008. "Takeup, social multipliers and optimal social insurance," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 722-737, April.
    13. 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).
    14. Katherin Ross Phillips & Timothy Smeeding, 1999. "Social Protection for the Poor in the Developed World: The Evidence from LIS," LIS Working papers 204, LIS Cross-National Data Center in Luxembourg.

    More about this item

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:340. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F Baum). General contact details of provider: http://edirc.repec.org/data/debocus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.