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US Labour Market Policy and the Canada-US Unemployment Rate Gap

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Author Info

  • David Andolfattio
  • Paul Gomme
  • Paul A. Storer

Abstract

In this paper, we investigate the extent to which changes in US labour market policy in the 1980s may have contributed to the emergence of an unemployment rate gap between Canada and the United States. In that decade, unemployment insurance benefits became taxable, income tax rates fell substantially, and various administrative changes were made that effectively tightened unemployment insurance eligibility requirements. These policy changes are evaluated in the context of a computable equilibrium model of the labour market. Our estimates suggest that all of these reforms together can account for no more than a 0.4 percentage point decline in the US natural rate of unemployment; a combined effect which accounts for 20 percent of the unemployment rate gap.

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Bibliographic Info

Article provided by University of Toronto Press in its journal Canadian Public Policy.

Volume (Year): 24 (1998)
Issue (Month): s1 (February)
Pages: 210-232

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Handle: RePEc:cpp:issued:v:24:y:1998:i:s1:p:210-232

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Cited by:
  1. David Andolfatto & Paul Gomme, 1998. "Unemployment and economic welfare," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 25-34.
  2. Toshihiko Mukoyama & Richard Rogerson & Aysegul Sahin & Per Krusell, 2009. "Labor supply in a frictional labor market," 2009 Meeting Papers 54, Society for Economic Dynamics.
  3. Richard Rogerson, 1997. "Theory Ahead of Language in the Economics of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 73-92, Winter.
  4. Michael W.L. Elsby & Bart Hobijn & Aysegül Sahin, 2013. "On the importance of the participation margin for market fluctuations," Working Paper Series 2013-05, Federal Reserve Bank of San Francisco.
  5. Per Krusell & Toshihiko Mukoyama & Richard Rogerson & Aysegul Sahin, 2009. "Aggregate Labor Market Outcomes: The Role of Choice and Chance," NBER Working Papers 15252, National Bureau of Economic Research, Inc.

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