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Labor Market Adjustment in Canada and the United States

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  • Mr. Alun H. Thomas
  • Mr. Eswar S Prasad

Abstract

This paper provides a quantitative assessment of the relative importance of different labor market adjustment mechanisms in Canada and the United States and also examines the effects of the unemployment insurance (UI) system on labor market adjustment. At the aggregate level, employment growth shocks result in similar unemployment rate responses but smaller wage responses in Canada relative to the United States. Although overall UI generosity has increased aggregate unemployment persistence in Canada, the endogenous component of UI has affected unemployment persistence only marginally. The lower degree of aggregate real wage flexibility in Canada has not been an important determinant of unemployment persistence.

Suggested Citation

  • Mr. Alun H. Thomas & Mr. Eswar S Prasad, 1997. "Labor Market Adjustment in Canada and the United States," IMF Working Papers 1997/002, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1997/002
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    References listed on IDEAS

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    1. Chan Guk Huh & Bharat Trehan, 1995. "Modeling the time-series behavior of the aggregate wage rate," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
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    3. Card, David & Freeman, Richard B. (ed.), 1993. "Small Differences That Matter," National Bureau of Economic Research Books, University of Chicago Press, number 9780226092836, Febrero.
    4. David Card & W. Craig Riddell, 1993. "A Comparative Analysis of Unemployment in Canada and the United States," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 149-190, National Bureau of Economic Research, Inc.
    5. Robert A. Amano & R. Tiff Macklem, 1998. "Unemployment Persistence and Costly Adjustment of Labour: A Canada-US Comparison," Canadian Public Policy, University of Toronto Press, vol. 24(s1), pages 138-151, February.
    6. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
    7. Miles Corak & Stephen R. G. Jones, 1995. "The Persistence of Unemployment: How Important Were Regional Extended Unemployment Insurance Benefits?," Canadian Journal of Economics, Canadian Economics Association, vol. 28(3), pages 555-567, August.
    8. David Card & Richard B. Freeman, 1993. "Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States," NBER Books, National Bureau of Economic Research, Inc, number card93-1, March.
    9. Andolfatto, David & Gomme, Paul, 1996. "Unemployment insurance and labor-market activity in Canada," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 47-82, June.
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    Cited by:

    1. Eswar Prasad & Alun Thomas, 1998. "A disaggregated analysis of employment growth fluctuations in Canada," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(3), pages 274-287, September.
    2. Mario Lefebvre, 1997. "Les marchés du travail régionaux : une comparaison entre le Canada et les États-Unis," Staff Working Papers 97-17, Bank of Canada.

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