Employment Insurance: Interregional Redistribution versus Protection against Changing Labour Market Conditions
Abstract
Abstract
In this article, I quantitatively investigate the business cycle properties of the Canadian unemployment insurance system, Employment Insurance (EI). EI is designed in such a way that the generosity of benefits depends on regional labour market conditions and thus varies over time with the state of the macro economy as well as geographically depending on local unemployment rates. Simulations of a life-cycle model with heterogeneous agents and search frictions show that the welfare impact of the temporal changes in EI generosity is extremely small. It is dominated by the distributional effects of regional differentiation—that is, regions with persistently high unemployment rates benefit from more generous EI benefits because they are subsidized by regions with low unemployment.
Résumé
L’auteur soumet à une analyse quantitative les propriétés cycliques du programme canadien d’assurance chômage, le régime d’assurance emploi (AE). L’AE est conçue de telle sorte que la générosité des avantages dépend conjoncture du marché du travail régional et varie donc dans le temps avec la situation macroéconomique et géographique, en fonction des taux de chômage locaux. Des simulations d’un modèle de cycle de vie comportant des agents hétérogènes et des éléments de friction relatifs à la recherche révèlent que l’incidence sur le bien-être des variations temporelles dans le degré de générosité de l’AE est extrêmement faible. Elle est dominée par les répercussions de la différenciation régionale sur la distribution — c’est-à-dire que les régions dont les taux de chômage élevés sont persistants bénéficient d’avantages plus généreux en matière d’AE parce qu’elles sont subventionnées par les régions présentant un faible taux de chômage.
Get full access to this article
View all available purchase options and get full access to this article.
References
Andersen, T.M., and M. Svarer. 2010. “Business Cycle Dependent Unemployment Insurance.” IZA Discussion Paper 5196. Bonn: Institute of Labor Economics. At http://repec.iza.org/dp5196.pdf.
Andersen, T.M., and M. Svarer. 2011. “State Dependent Unemployment Benefits.” Journal of Risk and Insurance 78(2):325–44. https://doi.org/10.1111/j.1539-6975.2010.01379.x.
Campolieti, M. 2011. “The Ins and Outs of Unemployment in Canada, 1976–2008.” Canadian Journal of Economics/Revue canadienne d’économique 44(4):1331–49. https://doi.org/10.1111/j.1540-5982.2011.01676.x.
Canada. 2019. “EI Regular Benefits - How Much You Could Receive.” At https://www.canada.ca/en/services/ben?efits/ei/ei-regular-benefit/benefit-amount.html.
Canada Employment Insurance Commission (CEIC). 2012. “Employment Insurance: 2011 Monitoring and Assessment Report.” Gatineau, QC: CEIC. At http://publications.gc.ca/collections/collection_2012/rhdcc-hrsdc/HS1-2-2011-eng.pdf.
Canada Employment Insurance Commission (CEIC). 2013. “Employment Insurance: 2012 EI Monitoring and Assessment Report.” Gatineau, QC: CEIC. At http://publica?tions.gc.ca/collections/collection_2013/rhdcc-hrsdc/HS1-2-2012-eng.pdf.
Canada Employment Insurance Commission (CEIC). 2016. “2014/2015 Employment Insurance Monitoring and Assessment Report.” Gatineau, QC: CEIC. At http://publica?tions.gc.ca/collections/collection_2017/edsc-esdc/Em13-1-2015-eng.pdf.
Canada Employment Insurance Commission (CEIC). 2018. “2016/2017 Employment Insurance Monitoring and Assessment Report.” Gatineau, QC: CEIC.
Chodorow-Reich, G., J. Coglianese, and L. Karabarbounis. 2019. “The Macro Effects of Unemployment Benefit Extensions: A Measurement Error Approach.” Quarterly Journal of Economics 134(1):227–79. https://doi.org/10.1093/qje/qjy018.
Christiano, L.J., M.S. Eichenbaum, and M. Trabandt. 2016. “Unemployment and Business Cycles.” Econometrica 84(4):1523–69. https://doi.org/10.3982/ecta11776.
Ek, S. 2012. “Unemployment Benefits and Taxes: How Should Policy Makers Redistribute Income Over the Business Cycle?” IZA Discussion Paper 6308. Bonn: Institute of Labor Economics. At http://ftp.iza.org/dp6308.pdf.
Elsby, M.W.L., B. Hobijn, and A. Şahin. 2013. “Unemployment Dynamics in the OECD.” Review of Economics and Statistics 95(2):530–48. https://doi.org/10.1162/rest_a_00277.
Elsby, M.W.L., R. Michaels, and G. Solon. 2009. “The Ins and Outs of Cyclical Unemployment.” American Economic Journal: Macroeconomics 1(1):84–110. https://doi.org/10.1257/mac.1.1.84.
Farber, H.S., and R.G. Valletta. 2015. “Do Extended Unemployment Benefits Lengthen Unemployment Spells? Evidence From Recent Cycles in the U.S. Labor Market.” Journal of Human Resources 50(4):873–909. https://doi.org/10.3368/jhr.50.4.873.
Hagedorn, M., I. Manovskii, and K. Mitman. 2016a. “The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?” NBER Working Paper 20884. Cambridge, MA: National Bureau of Economic Research. At https://www.nber.org/papers/w20884.pdf.
Hagedorn, M., I. Manovskii, and K. Mitman. 2016b. “Interpreting Recent Quasi-Experimental Evidence on the Effects of Unemployment Benefit Extensions.” NBER Working Paper 22280. Cambridge, MA: National Bureau of Economic Research. At https://www.nber.org/papers/w22280.pdf.
Hopenhayn, H.A., and J.P. Nicolini. 1997. “Optimal Unemployment Insurance.” Journal of Political Economy 105(2):412–38. https://doi.org/10.1086/262078.
Jung, P., and K. Kuester. 2015. “Optimal Labor-Market Policy in Recessions.” American Economic Journal: Macroeconomics 7(2):124–56. https://doi.org/10.1257/mac.20130028.
Kiley, M.T. 2003. “How Should Unemployment Benefits Respond to the Business Cycle?” B.E. Journal of Economic Analysis & Policy 3(1):1–20. https://doi.org/10.2202/1538-0653.1066.
Kristoffersen, M.S. 2012. “Business Cycle Dependent Unemployment Benefits With Wealth Heterogeneity and Precautionary Savings.” Economics Working Papers 2012–19, Department of Economics and Business Economics, Aarhus University, Aarhus, Denmark. At ftp://ftp.econ.au.dk/afn/wp/12/wp12_19.pdf.
Kroft, K., and M.J. Notowidigdo. 2016. “Should Unemployment Insurance Vary With the Local Unemployment Rate? Theory and Evidence.” Review of Economic Studies 83(3):1092–124. https://doi.org/10.1093/restud/rdw009.
Landais, C., P. Michaillat, and E. Saez. 2013. “Optimal Unemployment Insurance Over the Business Cycle.” Discussion Paper 1303, Centre for Macroeconomics, London School of Economics and Political Science, London. At http://www.centreformacroeconomics.ac.uk/Discussion-Papers/2013/CFMDP2013-03-Paper.pdf.
Ljungqvist, L., and T. Sargent. 1998. “The European Unemployment Dilemma.” Journal of Political Economy 106(3):514–50. https://doi.org/10.1086/250020.
Mitman, K., and S. Rabinovich. 2011. “Pro-Cyclical Unemployment Benefits? Optimal Policy in an Equilibrium Business Cycle Model.” PIER Working Paper 11-023, Penn Institute for Economic Research, Philadelphia. At https://economics.sas.upenn.edu/sites/default/files/filevault/11-023.pdf.
Mitman, K., and S. Rabinovich. 2014. “Do Unemployment Benefit Extensions Explain the Emergence of Jobless Recoveries?” At https://pdfs.semanticscholar.org/9a9c/1b907fd3e72c1fb8ccc1e179b23209193137.pdf.
Mortensen, D. 1977. “Unemployment Insurance and Job Search Decisions.” Industrial and Labor Relations Review 30(4):505–17. https://doi.org/10.2307/2523111.
Moyen, S., and N. Stähler. 2009. “Unemployment Insurance and the Business Cycle: Prolong Benefit Entitlements in Bad Times?” Deutsche Bundesbank Discussion Paper Series 1: Economic Studies No. 30/2009, Deutsche Bundesbank, Frankfurt. At https://www.econstor.eu/bitstream/10419/28619/1/611999161.pdf.
Nakajima, M. 2012. “A Quantitative Analysis of Unemployment Benefit Extensions.” Journal of Monetary Economics 59(7):686–702. https://doi.org/10.1016/j.jmoneco.2012.09.005.
Pallage, S., and C. Zimmermann. 2005. “On Voters’ Attitudes Towards Unemployment Insurance Subsidies Across Regions: A Canadian Simulation.” Journal of Population Economics 19(2):391–410. https://doi.org/10.1007/s00148-005-0028-9.
Pissarides, C.A. 2000. Equilibrium Unemployment Theory. Cambridge, MA: MIT Press.
Pollak, A. 2018 “Employment Insurance Differentiation Over the Business Cycle.” MPRA Paper 55057, Munich Personal RePEc Archive, Munich University Library, Munich. Accessed 15 May 2019 at https://mpra.ub.uni-muenchen.de/93492/8/MPRA_paper_55057.pdf.
Rothstein, J. 2011. “Unemployment Insurance and Job Search in the Great Recession.” Brookings Papers on Economic Activity 42(2):143–213. https://doi.org/10.1353/eca.2011.0018.
Sánchez, J.M. 2008. “Optimal State-Contingent Unemployment Insurance.” Economics Letters 98(3):348–57. https://doi.org/10.1016/j.econlet.2007.05.015.
Schmieder, J.F., T.M. von Wachter, and S. Bender. 2012. “The Effects of Extended Unemployment Insurance Over the Business Cycle: Evidence From Regression Discontinuity Estimates Over Twenty Years.” NBER Working Paper 17813. Cambridge, MA: National Bureau of Economic Research. At https://www.nber.org/papers/w17813.pdf.
Schuster, P. 2012. “Cyclical Unemployment Benefits and Non-Constant Returns to Matching.” At https://sites.google.com/site/schusterphilip/bcui.
Shavell, S., and L. Weiss. 1979. “The Optimal Payment of Unemployment Insurance Benefits Over Time.” Journal of Political Economy 87(6):1347–62. https://doi.org/10.1086/260839.
Sienkiewicz, Ł. 2011. “EEO Review: Adapting Unemployment Benefit Systems to the Economic Cycle, 2011—Poland.” At https://ec.europa.eu/social/BlobServlet?docId=12161&langId=en.
Tatsiramos, K., and J.C. van Ours. 2012. “Labor Market Effects of Unemployment Insurance Design.” Journal of Economic Surveys 28(2):284–311. https://doi.org/10.1111/joes.12005.
Information & Authors
Information
Published In
Canadian Public Policy
Volume 45 • Number 3 • September 2019
Pages: 329 - 341
Copyright
© Canadian Public Policy / Analyse de politiques.
History
Published online: 30 July 2019
Published in print: September 2019
Keywords:
Mots clés :
Authors
Metrics & Citations
Metrics
Related Content
Citations
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.
Download article citation data for:
Canadian Public Policy 2019 45:3, 329-341
Canadian Public Policy 2019 45:3, 329-341