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

Thomas Lemieux () and W. Bentley Macleod

No 340., Boston College Working Papers in Economics from Boston College Department of Economics

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.

Date: 1997-01-01
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Related works:
Working Paper: Supply Side Hysterisis: The Case of the Canadian Unemployment InsuranceSystem (1998)
Journal Article: Supply side hysteresis: the case of the Canadian unemployment insurance system (2000)
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