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The Long-Term Effects of Income Support: Unemployment Insurance in New Brunswick and Maine, 1940-1991. Peter Kuhn, UCSB Chris Riddell, Queen’s University. Motivation. Typical study of income support, including UI, focuses on: short-term responses to small changes in a
Peter Kuhn, UCSB
Chris Riddell, Queen’s University
short-term responses to
small changes in a
single program parameter, in a
restricted subpopulation of workers.
Note: NB figures are for 1990, ME for 1989
-sample is persons 25-59 with at least one week of work
-23 percent of all New Brunswick men aged 25-59 received some UI income in 1990.
1940-50: UI system introduced; 1950 NB UI system most similar to Maine’s
-annual weeks of income (at usual weekly rate), given weeks worked
Cell-level analysis is for workers (persons with positive weeks worked) only
Table 3: Regression estimates of the incidence of part year work, Cell data 1940-91
NOTES: Coefficients are derived from a WLS regression of the fraction of workers working fewer than 40 weeks per year
on the independent variables shown, plus fixed effects for industry and for industry*region interactions.
Robust t-statistics are in parentheses (in absolute value). The ‘relative income’ variable is the log of the ratio of part-year income
to full-year income. 1940 is the omitted year. All regressions are weighted by annual industry shares in employment.
Table 4: Estimated Effects of Category-Specific Income in McFadden choice model
NOTES: t-statistics are in parentheses (in absolute value). The dependent variable equals one for the weeks worked category realized, zero for each other weeks worked category. Estimation is by conditional logit. The category-specific income variable is the log of real total income (in 1983 dollars in each country) in the weeks category. Control variables in all specifications comprise a full set of region and year effects, plus a vector of personal characteristics (X), and X interacted with region. X in turn contains education (dummies for 4 levels), age and its square, plus indicators for marriage, presence of children and school attendance. Relative income is calculated using an individual’s predicted wage from gender/region/year-specific weekly wage regressions and the UI rules prevailing in his/her country/year. The sample is restricted to individuals of age 25 to 59. In the four-outcome choice model, the sample is restricted to persons working at least one week, and a vector of industry effects is also included in X.
Table 5: Actual and Predicted Counterfactual Weeks-Worked Distributions, 5-outcome model
Thus, for men, NB’s 1971 UI Act explains all its (absolute and relative) decline in FY work (from 72.3 to 64.5 percent). Also explains shift into 14-26-week category
Columns 4 and 8 also show that UI explains much of the 1990 international gap in the distribution of weeks worked.