Endogeneity in Structural Unemployment Equations: The Case of Canada

December 1, 1993

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Endogeneity in Structural Unemployment Equations: The Case of Canada, (USA: International Monetary Fund, 1993) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the endogeneity of several structural variables which enter unemployment rate equations—the generosity of unemployment benefits, nonwage labor costs, the relative minimum wage, and the degree of unionization. It finds evidence of reverse causality for these structural variables based on causality tests. The structural unemployment rate equation is then estimated using instruments suggested by the empirical analysis of the structural variables. The paper confirms the earlier finding that the generosity of unemployment benefits, nonwage labor costs, and the relative minimum wage have a significant positive impact on the unemployment rate, but fails to find an effect for the degree of unionization.

Subject: Labor, Labor costs, Labor unions, Minimum wages, Unemployment, Unemployment rate

Keywords: Labor costs, Labor unions, Minimum wages, Replacement rate, UI account, UI premium, UI reform, UI system, Unemployment, Unemployment equation, Unemployment rate, Unemployment rate equation, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1993/094
Stock No:

WPIEA0941993
ISBN:

9781451950694
ISSN:

1018-5941

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