Real and Insurance-Induced Unemployment in Canada

Abstract

Real and insurance-induced unemployment in Canada. Changes in unemployment insurance programs, either changes in the level of benefits relative to wages or in the nature and enforcement of eligibility rules, can affect reported unemployment rates by altering workers' work/leisure tradeoff and job-search behaviour. It is essentially an empirical question whether the net change in the unemployment rate is positive or negative. This paper presents empirical evidence, in the form of an econometric model estimated using annual time series data for Canada covering the period 1953-72, suggesting that changes in the unemployment insurance scheme have substantially increased the unemployment rate in recent years.