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Supply Side Hysterisis: The Case of the Canadian Unemployment InsuranceSystem

Thomas Lemieux, W. Bentley MacLeod

NBER Working Paper No. 6732
Issued in September 1998
NBER Program(s):Public Economics, Labor Studies

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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Document Object Identifier (DOI): 10.3386/w6732

Published: Lemieux, Thomas and W. Bentley MacLeod. "Supply Side Hysteresis: The Case Of The Canadian Unemployment Insurance System," Journal of Public Economics, 2000, v78(1-2,Oct), 139-170. citation courtesy of

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