Long-Time Out: Unemployment and Joblessness in Canada and the United States (WP-18-29)


WP-18-29

Kory Kroft, Fabian Lange, Matthew J. Notowidigdo, and Matthew Tudball

 

The researchers 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], they
document a rise in long-term unemployment in Canada. This increase is not accounted for by changes
in the observable composition of the unemployed. They 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 the researchers to model duration dependence in all
labor force flows involving either unemployment or non-participation. To calibrate the extended
matching model, they create a new historical vacancy series for Canada based on relative employment
in “recruiting industries,” allowing them to construct a monthly Beveridge curve for Canada. They
find that the calibrated model matches the time series of unemployment fairly well, but does less well
matching non-participation. Their 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.

Kory Kroft, Associate Professor of Economics, University of Toronto

Fabian Lange, Canada Research Chair in Labour and Personnel Economics, McGill University

Matthew J. Notowidigdo, Associate Professor of Economics and IPR Fellow, Northwestern University

Matthew Tudball, PhD Student in Integrative Epidemiology, University of Bristol

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