The Long-Term Effects of Unemployment Insurance: Evidence from New Brunswick and Maine, 1940-1991
Using data spanning half a century for adjacent jurisdictions in the United States and Canada, the authors study the long-term effects of a generous unemployment insurance (UI) program on the distribution of weeks worked. They find substantial effects. For example, in 1990, about 12.6% of working-age men in Maine’s northernmost counties worked between 1 and 39 weeks; just across the border in New Brunswick, the figure was 25.6%. According to the estimates, New Brunswick’s much more generous UI system accounts for over three-fourths of this differential. In part because part-year workers are drawn from both ends of the distribution of annual weeks worked (0 weeks and 40–52 weeks), the generosity of New Brunswick’s program had only modest estimated effects on total labor supply, even as it substantially increased UI program participation and expenditures.