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Unemployment in the Stock and Flow

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  • Heisz, Andrew
  • Baker, Michael
  • Corak, Miles

Abstract

A framework for the dynamic analysis of unemployment is presented, and applied to Canadian and U.S. data. The focus of the analysis is upon the distinctionbetween being unemployed and becoming unemployed, that is, between the stock and the flow of unemployment. The share of a particular group in the stock ofunemployed will differ from its share in the flow into unemployment to the extent that the average duration of unemployment for the group differs from the economywide average. An analysis of Canadian and U.S. data leads to a series of stylized facts that permit a deeper understanding of unemployment in the two countries, andof the differences between them. Significant differences in the average duration of unemployment imply that stock shares are not good indicators of flow shares,changes in the stock share of some groups are due to changes in the flow share, while for others they are due to changes in the length of unemployment spells.Explanations of the Canada - U.S. unemployment rate gap should try to accommodate at least three facts uncovered by the analysis: (1) that employer initiatedpermanent separations are the primary means of entry into unemployment in Canada, while labour force entry plays a more important role in the US; (2)unemployment spells are significantly longer in Canada than in the U.S. because of longer spells for most groups regardless of reason for unemployment, not becauseof a compositional difference in the make up of the unemployed; and (3) that longer spell duration and a higher incidence of unemployment contribute about equallyto the trend increase in the Canada - U.S. unemployment differential during the 1980s.

Suggested Citation

  • Heisz, Andrew & Baker, Michael & Corak, Miles, 1996. "Unemployment in the Stock and Flow," Analytical Studies Branch Research Paper Series 1997097e, Statistics Canada, Analytical Studies Branch.
  • Handle: RePEc:stc:stcp3e:1997097e
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    File URL: https://www150.statcan.gc.ca/n1/en/catalogue/11F0019M1997097
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    References listed on IDEAS

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    1. Ross D. Milbourne & Douglas D. Purvis & W. David Scoones, 1991. "Unemployment Insurance and Unemployment Dynamics," Canadian Journal of Economics, Canadian Economics Association, vol. 24(4), pages 804-826, November.
    2. Jay L. Zagorsky, 1998. "Job Vacancies In The United States: 1923 To 1994," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 338-345, May.
    3. M. W. Keil & J. S. V. Symons, 1990. "An Analysis of Canadian Unemployment," Canadian Public Policy, University of Toronto Press, vol. 16(1), pages 1-16, March.
    4. Baker, G M & Trivedi, P K, 1985. "Estimation of Unemployment Duration from Grouped Data: A Comparative Study," Journal of Labor Economics, University of Chicago Press, vol. 3(2), pages 153-174, April.
    5. Baker, Michael, 1992. "Digit preference in CPS unemployment data," Economics Letters, Elsevier, vol. 39(1), pages 117-121, May.
    6. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
    7. Rebecca M. Blank & David E. Card, 1991. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1157-1189.
    8. Fortin, Mario, 1994. "L’écart de chômage entre le Canada et les États-Unis : analyse des divergences entre les hommes et les femmes," L'Actualité Economique, Société Canadienne de Science Economique, vol. 70(3), pages 247-270, septembre.
    9. 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.
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    12. Stephen W. Salant, 1977. "Search Theory and Duration Data: A Theory of Sorts," The Quarterly Journal of Economics, Oxford University Press, vol. 91(1), pages 39-57.
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    16. Lancaster, Tony & Chesher, Andrew, 1981. "Stock and flow sampling," Economics Letters, Elsevier, vol. 8(1), pages 63-65.
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    Cited by:

    1. Cédric Tille, 1998. "Decomposition of the Unemployment Gap between Canada and the United States: Duration or Incidence?," Canadian Public Policy, University of Toronto Press, vol. 24(s1), pages 90-102, February.

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