Unemployment Insurance and Male Unemployment Duration in Canada

A model of unemployment duration is estimated with weekly micro data on a sample of Canadian men during the 1975 through 1980 period. Entitlement provisions in the unemployment insurance program and demand conditions are found to have a significant impact on the probability of leaving unemployment. The probability of a worker leaving unemployment declines with duration of unemployment, holding unemployment insurance entitlement constant. When entitlement is allowed to vary, the probability of leaving first falls and then generally rises with unemployment duration as the declining entitlement induces a greater willingness to accept offers or search more intensively. These results are robust to alternative specifications of duration dependence and to allowing for person-specific unobserved heterogeneity.