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Firms, Industries, and Unemployment Insurance: An Analysis Using Employer-employee Data from Canada

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  • Chen, Wen-Hao
  • Corak, Miles

Abstract

The exploration of newly available administrative data in a number of countries has led to a growing realization that a careful study of the interaction between employer and employee characteristics is needed to fully understand labour market outcomes. The objective of this paper is to develop this theme by examining the design of social policy and its interaction with the labour market. The focus is on the Canadian unemployment insurance (UI) program. This analysis uses administrative data on the universe of employees, firms, and UI recipients in Canada over an 11 year period to examine the operation of UI from the perspective of the firm, paying particular attention to longitudinal issues associated with the pattern and causes of cross-subsidies. The findings show that persistent transfers through UI are present at both industry and firm levels. These cross-subsidies are concentrated among a small fraction of firms. An analysis using firm fixed effect indicates that almost 60 percent of explained variation in persistent cross-subsidies can be attributed to firm effects. Calculations of overall efficiency loss are very sensitive to the degree to which firm level information is used. A full appreciation of how social programs like UI interact with the labour market requires recognition of the characteristics and human resource practices of firms, and might be more fruitfully explored by implicit contract models of unemployment.

Suggested Citation

  • Chen, Wen-Hao & Corak, Miles, 2005. "Firms, Industries, and Unemployment Insurance: An Analysis Using Employer-employee Data from Canada," Analytical Studies Branch Research Paper Series 2005260e, Statistics Canada, Analytical Studies Branch.
  • Handle: RePEc:stc:stcp3e:2005260e
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    File URL: http://www5.statcan.gc.ca/olc-cel/olc.action?ObjId=11F0019M2005260&ObjType=46&lang=en&limit=0
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    References listed on IDEAS

    as
    1. Lin, Zhengxi, 1998. "Employment Insurance in Canada: Recent Trends and Policy Changes," Analytical Studies Branch Research Paper Series 1998125e, Statistics Canada, Analytical Studies Branch.
    2. 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.
    3. Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, vol. 73(4), pages 541-559, September.
    4. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    5. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
    6. Denis Lawrence, 1989. "An Aggregator Model of Canadian Export Supply and Import Demand Responsiveness," Canadian Journal of Economics, Canadian Economics Association, vol. 22(3), pages 503-521, August.
    7. Baldwin,John R. & Gorecki,Paul, 1998. "The Dynamics of Industrial Competition," Cambridge Books, Cambridge University Press, number 9780521633574.
    8. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-957, October.
    9. Miles Corak, 1993. "Is Unemployment Insurance Addictive? Evidence from the Benefit Durations of Repeat Users," ILR Review, Cornell University, ILR School, vol. 47(1), pages 62-72, October.
    10. Patricia M. Anderson & Bruce D. Meyer, 1993. "The Unemployment Insurance Payroll Tax and Interindustry and Interfirm Subsidies," NBER Chapters,in: Tax Policy and the Economy, Volume 7, pages 111-144 National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Employment insurance; social assistance and other transfers; Industries; Labour; Workplace organization; innovation; performance;

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