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Long Time Out: Unemployment and Joblessness in Canada and the United States

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Listed:
  • Kory Kroft
  • Fabian Lange
  • Matthew J. Notowidigdo
  • Matthew Tudball

Abstract

We compare patterns of unemployment and joblessness between Canada and the U.S. during the Great Recession. Similar to previous findings for the U.S. in Kroft et al. [2016], we document a rise in long-term unemployment in Canada. This increase is not accounted for by changes in the observable composition of the unemployed. We then extend the matching model in Kroft et al. [2016] to exploit the restricted-access panel data from the Canadian Labor Force Survey which contains information on the time since the last job (“joblessness duration”) for both unemployed individuals and non-participants. This allows us to model duration dependence in all labor force flows involving either unemployment or non-participation. To calibrate the extended matching model, we create a new historical vacancy series for Canada based on relative employment in “recruiting industries”, allowing us to construct a monthly Beveridge curve for Canada. We find that the calibrated model matches the time series of unemployment fairly well, but does less well matching non-participation. Our results also indicate that allowing for duration dependence in flows between unemployment and non-participation is crucial for explaining overall levels in long-term joblessness, and that changes in the duration distribution among the unemployed and non-participants contributed less to the deterioration of labor market conditions in Canada, relative to the U.S. In part, this difference comes from the fact that the U.S. recession was much more severe.

Suggested Citation

  • Kory Kroft & Fabian Lange & Matthew J. Notowidigdo & Matthew Tudball, 2018. "Long Time Out: Unemployment and Joblessness in Canada and the United States," NBER Working Papers 25236, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25236
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    References listed on IDEAS

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    1. Kudlyak, Marianna & Lange, Fabian, 2014. "Measuring Heterogeneity in Job Finding Rates Among the Nonemployed Using Labor Force Status Histories," IZA Discussion Papers 8663, Institute of Labor Economics (IZA).
    2. Farber, Henry S & Silverman, Dan & Wachter, Till von, 2015. "Factors Determining Callbacks to Job Applications by the Unemployed: An Audit Study," IZA Discussion Papers 9465, Institute of Labor Economics (IZA).
    3. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    4. Kory Kroft & Fabian Lange & Matthew J. Notowidigdo, 2013. "Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1123-1167.
    5. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 705-746.
    6. Camille Landais & Pascal Michaillat & Emmanuel Saez, 2018. "A Macroeconomic Approach to Optimal Unemployment Insurance: Theory," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 152-181, May.
    7. Samuel Bentolila & J. Ignacio García-Pérez & Marcel Jansen, 2017. "Are the Spanish long-term unemployed unemployable?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 8(1), pages 1-41, March.
    8. Kory Kroft & Fabian Lange & Matthew J. Notowidigdo & Lawrence F. Katz, 2016. "Long-Term Unemployment and the Great Recession: The Role of Composition, Duration Dependence, and Nonparticipation," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 7-54.
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    Cited by:

    1. Song, Chen & Wei, Chao, 2019. "Unemployment or out of the labor force: A perspective from time allocation," Labour Economics, Elsevier, vol. 61(C).

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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