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Can a Matching Model Explain the Long-Run Increase in Canada's Unemployment Rate?

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  • Andreas Hornstein
  • Mingwei Yuan

Abstract

We construct a simple general equilibrium model of unemployment and calibrate it to the Canadian economy. Job creation and destruction are endogenous. In this model we consider several potential factors that could contribute to the long-run increase in the Canadian unemployment rate: a more generous unemployment insurance system, higher layoff costs, higher distortionary taxes, and a slower rate of productivity growth. We find that in the model economy the impact of all of these factors on the unemployment rate is small.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 32 (1999)
Issue (Month): 4 (August)
Pages: 878-905

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Handle: RePEc:cje:issued:v:32:y:1999:i:4:p:878-905

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References

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  1. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  2. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  3. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  4. David A. Green & Timothy Sargent, 1998. "Unemployment Insurance and Job Durations: Seasonal and Non-Seasonal Jobs," Canadian Journal of Economics, Canadian Economics Association, vol. 31(2), pages 247-278, May.
  5. Andelfatto, D. & Gomme, P., 1995. "Unemployment Insurance, Labor Market Dynamics, and Social Welfare," Working Papers 9502, University of Waterloo, Department of Economics.
  6. Green, David A & Riddell, W Craig, 1997. "Qualifying for Unemployment Insurance: An Empirical Analysis," Economic Journal, Royal Economic Society, vol. 107(440), pages 67-84, January.
  7. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 325-53, July.
  8. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  9. Christofides, L.N. & McKenna, C.J., 1993. "Employment Flows and Job Tenure in Canada," Working Papers 1993-1, University of Guelph, Department of Economics and Finance.
  10. Andelfatto, D. & Gomme, P., 1995. "Unemployment Insurance, Labor Market Dynamics, and Social Welfare," Working Papers 9502, University of Waterloo, Department of Economics.
  11. van Ours, Jan & Ridder, Geert, 1992. "Vacancies and the Recruitment of New Employees," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 138-55, April.
  12. Jones, Stephen R G & Kuhn, Peter, 1995. "Mandatory Notice and Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 599-622, October.
  13. Ron Parker, 1995. "Aspects of economic restructuring in Canada, 1989-1994," Bank of Canada Review, Bank of Canada, vol. 1995(Summer), pages 23-34.
  14. Christofides, L.N. & McKenna, C.J., 1993. "Employment Flows and Job Tenure in Canada," Working Papers 1993-1, University of Guelph, Department of Economics and Finance.
  15. Stephen R. G. Jones, 1993. "Cyclical and Seasonal Properties of Canadian Gross Flows of Labour," Canadian Public Policy, University of Toronto Press, vol. 19(1), pages 1-17, March.
  16. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  17. Beach, Charles M & Balfour, Frederick S, 1983. "Estimated Payroll Tax Incidence and Aggregate Demand for Labour in the United Kingdom," Economica, London School of Economics and Political Science, vol. 50(197), pages 35-48, February.
  18. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  19. repec:fth:simfra:95-09 is not listed on IDEAS
  20. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
  21. Peter Kuhn, 1993. "Employment Protection Laws: Policy Issues and Recent Research," Canadian Public Policy, University of Toronto Press, vol. 19(3), pages 279-297, September.
  22. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
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Cited by:
  1. Den Haan, Wouter J. & Kaltenbrunner, Georg, 2009. "Anticipated growth and business cycles in matching models," Journal of Monetary Economics, Elsevier, vol. 56(3), pages 309-327, April.
  2. Tripier, Fabien, 2004. "Can the labor market search model explain the fluctuations of allocations of time?," Economic Modelling, Elsevier, vol. 21(1), pages 131-146, January.

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