On August 7th, 1960, in less than a year from now, it will be twenty years since an unemployment insurance scheme was started in Canada. It is perhaps appropriate at this time to review the development of the scheme,and evaluate its impact on the Canadian economy. [...]

During recent years unemployment insurance has come to be recognized as an automatic stabilizer in the economy. This implies that unemployment insurance programmes operate so as to automatically dampen both economic expansions and contractions. In Canada, however, little empirical research aimed at determining the magnitude of this dampening effect has been undertaken. In an attempt to fill this void, this study makes an empirical assessment of the effectiveness of Canada's unemployment insurance programme as an automatic stabilizer. To do this the period 1950-1965 was broken down into its component periods of economic expansion and contraction. This period was chosen to reflect modern postwar economic conditions. The component periods consisted of three downswings and four upswings. Three techniques were then employed to determine the countercyclical role of the programme during each of the seven periods. Firstly, the change in national income during each period was compared to the changes in unemployment insurance benefits and contributions during the same periods. From this was obtained a measure of the portion of any change in national income offset by compensatory changes in benefits and/or contributions. Secondly, using the same periods, a simple multiplier model was employed to determine what portion of any potential change in national income was prevented by the unemployment insurance programme. For both of these techniques both historical data and data adjusted to remove the effect of changes in the programme were used. And thirdly, a correlation analysis was employed to determine whether benefits and contributions were directly or inversely associated with the level of economic activity. The results of this study indicate that Canada's unemployment insurance programme has performed creditably as an automatic stabilizer during periods of economic contraction. The benefit component of the scheme has been almost totally responsible for this effectiveness. Moreover, the efficacy of the programme during downswings has doubled in recent years - increasing from a compensatory effect of about 14% of the change in national income during the contraction of 1953-1954 to one of about 27% of the change in national income during the contraction of 196O-I961. The programme has been relatively less effective as an automatic stabilizer during periods of economic expansion. However, during the last two upswings a significant compensatory effect was experienced. The magnitude of this effect lay between 10% and 17% of the change in national income during the expansion of 1958-1960 and between 5% and 8% of the change in national Income during the upswing of 1961-1965. / Business, Sauder School of / Graduate

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Income support programs constitute an integral component of modern labour markets and represent significant fiscal commitments on the part of governments. This thesis examines two key income support programs in Canada and their impact on labour market outcomes, namely employment insurance (EI) and social assistance (SA). Together expenditures on EI and SA represented approximately 2 per cent of Canadian GDP in 1998-99 and influenced a range of labour market decisions relating to labour force participation, employment and unemployment spells. The analysis in this thesis provides new evidence on the role of the EI and SA programs on labour market outcomes by examining the interface between the programs and labour market behaviour. An analysis of the take-up of SA amongst a sample of SA eligible individuals is also undertaken that provides new evidence on the determinants of participation in the SA program in Canada. The analysis in this thesis uses the 1997 Canadian Out of Employment Panel dataset, a unique dataset that provides detailed information on the use of income support programs and employment patterns, and detailed information on a rich set of personal and household characteristics. The approach adopted in this thesis is to use a generalized probability transition model to examine the nature of the interface between income support programs and their effect on labour market outcomes. This approach allows the implications of changes in either program for use of the other program, and overall labour market outcomes, to be identified. The analysis of the SA take-up decision uses a discrete choice framework that explicitly takes account of the potential endogeneity of benefit levels available to the individual. A number of conclusions can be drawn from the analysis undertaken in this thesis. First, when the generosity of the SA program is reduced, individuals decrease use of both the SA and EI programs. Conversely, reducing the generosity of the EI program results in an increase in the use, albeit relatively small, of the SA program. The results of the analysis of the take-up decision of the SA program point to the key role of benefit levels and previous use of the program as determinants of the likelihood that an individual takes up SA.

Income support programs constitute an integral component of modern labour markets and represent significant fiscal commitments on the part of governments. This thesis examines two key income support programs in Canada and their impact on labour market outcomes, namely employment insurance (EI) and social assistance (SA). Together expenditures on EI and SA represented approximately 2 per cent of Canadian GDP in 1998-99 and influenced a range of labour market decisions relating to labour force participation, employment and unemployment spells. The analysis in this thesis provides new evidence on the role of the EI and SA programs on labour market outcomes by examining the interface between the programs and labour market behaviour. An analysis of the take-up of SA amongst a sample of SA eligible individuals is also undertaken that provides new evidence on the determinants of participation in the SA program in Canada. The analysis in this thesis uses the 1997 Canadian Out of Employment Panel dataset, a unique dataset that provides detailed information on the use of income support programs and employment patterns, and detailed information on a rich set of personal and household characteristics. The approach adopted in this thesis is to use a generalized probability transition model to examine the nature of the interface between income support programs and their effect on labour market outcomes. This approach allows the implications of changes in either program for use of the other program, and overall labour market outcomes, to be identified. The analysis of the SA take-up decision uses a discrete choice framework that explicitly takes account of the potential endogeneity of benefit levels available to the individual. A number of conclusions can be drawn from the analysis undertaken in this thesis. First, when the generosity of the SA program is reduced, individuals decrease use of both the SA and EI programs. Conversely, reducing the generosity of the EI program results in an increase in the use, albeit relatively small, of the SA program. The results of the analysis of the take-up decision of the SA program point to the key role of benefit levels and previous use of the program as determinants of the likelihood that an individual takes up SA. / Arts, Faculty of / Vancouver School of Economics / Graduate