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

Journal of Public Economics, Vol. 78, Issue 1-2, pp. 139-170, October 2000

Posted: 19 Aug 2001

See all articles by Thomas Lemieux

Thomas Lemieux

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

W. Bentley MacLeod

Columbia University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor 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, the generosity of the UI system was increased dramatically. We find some evidence that the propensity to collect UI increases with a first-time exposure to the new UI 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.

Keywords: Unemployment insurance, Learning, Incentives, Unemployment, Hysteresis

JEL Classification: H53, J64, J65

Suggested Citation

Lemieux, Thomas and MacLeod, William Bentley, Supply Side Hysteresis: The Case of the Canadian Unemployment Insurance System. Journal of Public Economics, Vol. 78, Issue 1-2, pp. 139-170, October 2000. Available at SSRN: https://ssrn.com/abstract=252531

Thomas Lemieux

University of British Columbia (UBC) - Department of Economics ( email )

997-1873 East Mall
Vancouver, BC V6T 1Z1
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
514-343-2395 (Phone)
514-343-5831 (Fax)

William Bentley MacLeod (Contact Author)

Columbia University - Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
680
PlumX Metrics