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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 which 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

Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 98-02.

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Date of creation: 1998
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Handle: RePEc:fip:fedrwp:98-02

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Keywords: Unemployment ; Econometric models;

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References

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  1. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. repec:fth:simfra:95-09 is not listed on IDEAS
  7. 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.
  8. 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.
  9. 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.
  10. Andelfatto, D. & Gomme, P., 1995. "Unemployment Insurance, Labor Market Dynamics, and Social Welfare," Working Papers 9502, University of Waterloo, Department of Economics.
  11. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  12. Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1994. "Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption," NBER Working Papers 4864, National Bureau of Economic Research, Inc.
  13. Louis N. Christofides & C. J. McKenna, 1993. "Employment Flows and Job Tenure in Canada," Canadian Public Policy, University of Toronto Press, vol. 19(2), pages 145-161, June.
  14. 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.
  15. Andelfatto, D. & Gomme, P., 1995. "Unemployment Insurance, Labor Market Dynamics, and Social Welfare," Working Papers 9502, University of Waterloo, Department of Economics.
  16. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  17. 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..
  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. 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.
  20. 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.
  21. Ron Parker, 1995. "Aspects of economic restructuring in Canada, 1989-1994," Bank of Canada Review, Bank of Canada, vol. 1995(Summer), pages 23-34.
  22. 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.
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Cited by:
  1. Den Haan, Wouter & Kaltenbrunner, Georg, 2007. "Anticipated Growth and Business Cycles in Matching Models," CEPR Discussion Papers 6063, C.E.P.R. Discussion Papers.
  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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