The Long-Term Effects of Income Support: Unemployment Insurance in New Brunswick and Maine, 1940-1991

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 28.06.2005, 12:15 - 13:30


Presentation by 

Peter J. Kuhn (University of California, Santa Barbara)


New Brunswick and Maine are an adjacent Canadian province and U.S. state with similar populations, climates and natural resource endowments. Over the last half-century, however, their unemployment insurance systems have evolved very differently, with the Canadian UI system eventually comprising a large share of both total transfer income and total income in the province. Using the five decennial censuses in both jurisdictions over this period from 1940 to 1991, we estimate the long-term effects of UI program parameters on labor market outcomes. We find that UIs implicit subsidy to part-year work substantially increases the prevalence of part-year work. This effect is not confined to seasonal industries. Our estimates of UI effects are considerably greater than those obtained from other studies because (a) the longer time horizon in our study allows for more adjustments to the UI system to occur, i.e. gives agents time to build a lifestyle around the program; and (b) the use of Maine as a control group for UI changes in New Brunswick allows us to adjust for a secular downward trend in part-year work among women, which otherwise would understate the effects of the UI system.

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