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The Unemployment Gap: Results, New Questions, and Policy Implications

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  • John F. Helliwell

Abstract

The unemployment rate gap between Canada and the United States poses not one puzzle but two: why the gap arose in the 1980s, and then why it persisted and grew in the 1990s? With respect to the 1980s, the evidence marshalled by Riddell and others showed that employment grew at similar rates in Canada and the United States, while labour force participation grew much faster in Canada. The unemployment insurance system was given a key role in explaining this difference. In the 1990s, the unemployment insurance systems have become more similar, and the Canadian participation rate has fallen. But the unemployment gap has grown rather than shrunk, requiring a new set of explanations. Cyclical differences have a role to play here, but are not likely to be large enough to do the trick. The growing difference in unionization rates may also have a role to play. The 1990s gap remains a puzzle.

Suggested Citation

  • John F. Helliwell, 1998. "The Unemployment Gap: Results, New Questions, and Policy Implications," Canadian Public Policy, University of Toronto Press, vol. 24(s1), pages 264-270, February.
  • Handle: RePEc:cpp:issued:v:24:y:1998:i:s1:p:264-270
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    References listed on IDEAS

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    1. 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.
    2. Lawrence H. Summers, 1986. "Why is the Unemployment Rate So Very High near Full Employment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 339-396.
    3. 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, June.
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