Markets alone cannot provide adequate protection against the risk of unemployment. Private unemployment insurance (UI) fails because of informational problems: the so-called moral hazard (changes in behavior in the presence of insurance that are impossible or very costly to detect) and adverse...

This paper presents results from a 1971 natural experiment carried out by the Canadian government on the unemployment insurance system. At that time, the generosity of the UI system was increased dramatically. We find some evidence that the propensity to collect UI increases with a first-time...