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

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  • Hornstein, Andreas
  • Yuan, Mingwei

Abstract

The authors construct a simple general equilibrium model of unemployment and calibrate it to the Canadian economy. Job creation and destruction are endogenous. In this model, they consider several potential factors that could contribute to the long-run increase in the Canadian unempoloyment rate: a more generous unemployment insurance system, higher layoff costs, higher discretionary taxes, and a slower rate of productivity growth. They 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

Paper provided by Bank of Canada in its series Working Papers with number 98-19.

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Length: 73 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:bca:bocawp:98-19

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Keywords: Economic Models; Fiscal Policy; Labour Markets;

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References

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  1. Andelfatto, D. & Gomme, P., 1995. "Unemployment Insurance, Labor Market Dynamics, and Social Welfare," Working Papers 9502, University of Waterloo, Department of Economics.
  2. 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.
  3. John C. Ham & Samuel Rea, 1986. "Unemployment Insurance and Male Unemployment Duration in Canada," Working Papers 592, Princeton University, Department of Economics, Industrial Relations Section..
  4. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  5. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  6. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  7. repec:fth:simfra:95-09 is not listed on IDEAS
  8. 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.
  9. Green, D.A. & Riddell, W.C., 1993. "Qualifying for Unemployment Insurance: An Empirical Analysis," UBC Departmental Archives 93-33, UBC Department of Economics.
  10. 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.
  11. Ron Parker, 1995. "Aspects of economic restructuring in Canada, 1989-1994," Bank of Canada Review, Bank of Canada, vol. 1995(Summer), pages 23-34.
  12. Christofides, L.N. & McKenna, C.J., 1993. "Employment Flows and Job Tenure in Canada," Working Papers 1993-1, University of Guelph, Department of Economics.
  13. 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.
  14. Green, D.A. & Sargent, T.C., 1995. "Unemployment Insurance and Job Durations: Seasonal and Non-Seasonal Jobs," UBC Departmental Archives 95-47, UBC Department of Economics.
  15. 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.
  16. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  17. Christofides, L.N. & McKenna, C.J., 1993. "Employment Flows and Job Tenure in Canada," Working Papers 1993-1, University of Guelph, Department of Economics.
  18. 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.
  19. Andelfatto, D. & Gomme, P., 1995. "Unemployment Insurance, Labor Market Dynamics, and Social Welfare," Working Papers 9502, University of Waterloo, Department of Economics.
  20. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  21. 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.
  22. 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.
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Citations

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Cited by:
  1. 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.
  2. 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.

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