The persistence of unemployment: How important were regional extended unemployment insurance benefits?

by Miles Corak and Stephen Jones
Business and Labour Market Analysis Division
Analytical Studies Branch research paper series, No. 053

This paper assesses the contribution of regionally extended unemployment insurance benefits to the persistence of the Canadian unemployment rate during the 1980s. We use administrative data associated with the operation of the U.I. program to produce counts of the number of U.I. claimants by benefit phase.

The data suggest that the change in the number of unemployed individuals above the level prevailing in 1981 is much larger than the change in the number of regionally extended benefit recipients. We also examine the time-series properties of the number of U.I. claimants by benefit phase, and find that the number of regionally extended recipients is not unusually persistent. Indeed, this series displays less persistence than the number of claimants in other benefit phases. We recognize that the increase in potential benefit duration caused by regionally extended benefits may lengthen the time claimants spend in the initial and labour force extended benefit phases, but conclude that this indirect channel would have to be particularly strong in order to prevent one from concluding that the number of regionally extended benefit recipients was of relatively little importance as an explanation of the increased level and persistence of the Canadian unemployment rate during the 1980s.

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