Can a Matching Model Explain the Long-Run Increase in Canada's Unemployment Rate?
Federal Reserve Bank of Richmond WP No. 97-8
Posted: 2 Sep 1998
Date Written: March 1998
We construct a simple general equilibrium model of unemployment and calibrate it to the Canadian economy. Job creation and destruction are endogenous. In this model, we consider several potential factors which could contribute to the long-run increase in the Canadian unemployment rate: a more generous unemployment insurance system, higher layoff costs, higher distortionary taxes, and a slower rate of productivity growth. We find that in the model economy the impact of all of these factors on the unemployment rate is small.
JEL Classification: E24, E62, C68
Suggested Citation: Suggested Citation