Unemployment in the Stock and Flow

Statistics Canada Working Paper #97

30 Pages Posted: 18 Dec 1996

See all articles by Miles Corak

Miles Corak

Statistics Canada; University of Ottawa; IZA Institute of Labor Economics

Michael Baker

University of Toronto - Department of Economics; National Bureau of Economic Research (NBER)

Andrew Heisz

Government of Canada - Analytical Studies Branch

Date Written: September 1996

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 distinction between being unemployed and becoming unemployed, that is, between the stock and the flow of unemployment. The share of a particular group in the stock of unemployed 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 economy-wide 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 and of 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-initiated permanent separations are the primary means of entry into unemployment in Canada, while labor force entry plays a more important role in the U.S.; 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 because of a compositional difference in the make up of the unemployed; and 3) that longer spell duration and a higher incidence of unemployment contribute about equally to the trend increase in the Canada-U.S. unemployment differential during the 1980s.

JEL Classification: J21, J64, E24

Suggested Citation

Corak, Miles and Baker, Michael and Heisz, Andrew, Unemployment in the Stock and Flow (September 1996). Statistics Canada Working Paper #97. Available at SSRN: https://ssrn.com/abstract=37080 or http://dx.doi.org/10.2139/ssrn.37080

Miles Corak (Contact Author)

Statistics Canada ( email )

Family and Labour Studies
Ottawa, Ontario K1A 0T6
Canada
613-951-9047 (Phone)
613-951-5403 (Fax)

University of Ottawa

2292 Edwin Crescent
Ottawa, Ontario K2C 1H7
Canada

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael Baker

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4138 (Phone)
416-978-6713 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrew Heisz

Government of Canada - Analytical Studies Branch ( email )

120 Parkdale Avenue
24th Floor, R.H. Coats Building
Ottawa, Ontario K1A 0T6
Canada
613-951-3748 (Phone)
613-951-5403 (Fax)

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