Is Workers' Compensation a Substitute for Unemployment Insurance?

This paper examines how the Workers' Compensation (WC) and Unemployment Insurance (UI) programs interact to influence the duration of claims due to workplace accidents. We use longitudinal WC administrative micro-data on more than 30,000 workers in the Canadian construction industry for the period 1976–1986. For the estimations, we use the Meyer (1990) semi-parametric proportional hazard model. Our results show, in particular, that a reduction in the UI replacement ratio is associated with an increase in the duration of claims due to severe accidents that are difficult to diagnose. Moreover, the duration of spells on WC is much higher when an accident occurs in December, a month which corresponds to the beginning of the lay-off season in the construction sector. This result is consistent with the fact that WC benefits are more generous than UI benefits in Canada.