Temporary Employment and the Natural Rate of Unemployment
18 Pages Posted: 21 May 2000
Date Written: December 1999
This paper examines the determinants of the natural rate of unemployment using a combined cross section and time series data set. The results suggest that industry composition affects the natural rate. In particular, a higher share of temporary employment in a local labor market tends to lower the natural rate of unemployment -- most likely through the matching function. The results suggest that the increase in the share of temporary employment may have reduced the natural rate as much as 1/4 percentage point. The results also indicate that unemployment insurance benefits tend to boost the natural rate, while having a more highly educated work force tends to lower it. However, the degree of union presence in a local labor market had little impact on the natural rate.
Keywords: natural rate, temporary employment, matching function
JEL Classification: E24, J24
Suggested Citation: Suggested Citation