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

  • Andreas Hornstein
  • Mingwei Yuan

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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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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