UNEMPLOYMENT-INSURANCE ELIGIBILITY AND THE SCHOOL-TO-WORK TRANSITION IN CANADA AND THE UNITED-STATES

To study how the design of unemployment insurance (UI) affects people leaving school to find jobs, a model of job search in the presence of UI is developed and estimated for the United States and Canada, The le vel of UI benefits depends on previous earnings, which creates opposin g incentives for unemployed people not receiving benefits. Which of th ese opposing incentives dominates the other is found to differ across demographic groups within each country. Changes in UI policy therefore can have very different effects on different individuals. The major d ifferences found in the transition from school to work in Canada and t he United States are a lower rate of job-offer arrivals and a lower ra te of offer rejections in Canada. Within each country, offer-arrival r ates differ across individuals much more than offer-rejection rates.