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Cyclical Behavior of Unemployment and Job Vacancies: A Comparison between Canada and the United States

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  • Zhang Min

    (University of Toronto)

Abstract

As long as workers do not value their leisure much, the Mortensen-Pissarides search and matching model implies that unemployment and job vacancies would be much less responsive to changes in labor productivity than what we observe in the business cycles of the Canadian labor market. These findings parallel the work of Shimer (2005) for the United States. The combined data from both countries present an additional difficulty for the model. Even if the unobserved value of leisure is allowed to be as high as required to fit the business cycle in the United States or in Canada, as proposed by Hagedorn and Manovskii (2007), another failure arises. The model lacks ability to reconcile the similar labor cycles with the large policy differences in the UI benefits and income taxes in the two countries when the value of leisure is assumed to be the same in both countries.

Suggested Citation

  • Zhang Min, 2008. "Cyclical Behavior of Unemployment and Job Vacancies: A Comparison between Canada and the United States," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-37, October.
    • Handle: RePEc:bpj:bejmac:v:8:y:2008:i:1:n:27
    DOI: 10.2202/1935-1690.1690
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    References listed on IDEAS

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    Cited by:

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    2. Amaral, Pedro S. & Tasci, Murat, 2016. "The cyclical behavior of equilibrium unemployment and vacancies across OECD countries," European Economic Review, Elsevier, vol. 84(C), pages 184-201.
    3. Gabriele Cardullo & Marco Guerrazzi, 2016. "The Cyclical Volatility of Equilibrium Unemployment and Vacancies: Evidence From Italy," LABOUR, CEIS, vol. 30(4), pages 433-454, December.
    4. Miquel Faig, 2008. "Labor Market Cycles and Unemployment Insurance Eligibility," 2008 Meeting Papers 183, Society for Economic Dynamics.
    5. Zhang, Yahong, 2018. "Unemployment fluctuations in a small open-economy model with segmented labour markets: The case of Canada," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 6-20.
    6. Miquel Faig & Min Zhang, 2012. "Labor Market Cycles, Unemployment Insurance Eligibility, and Moral Hazard," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(1), pages 41-56, January.
    7. Ejarque, João Miguel, 2009. "A Search Model with a Quasi-Network," Economics Discussion Papers 8932, University of Essex, Department of Economics.
    8. Miyamoto, Hiroaki, 2011. "Cyclical behavior of unemployment and job vacancies in Japan," Japan and the World Economy, Elsevier, vol. 23(3), pages 214-225.
    9. Naval, Joaquín & Silva, José I. & Vázquez-Grenno, Javier, 2020. "Employment effects of on-the-job human capital acquisition," Labour Economics, Elsevier, vol. 67(C).
    10. João Miguel Ejarque, 2010. "A search model with a quasi network," 2010 Meeting Papers 597, Society for Economic Dynamics.
    11. Gihoon Hong, 2015. "Trade and Global Income Inequality with Frictional Labor Markets: A Lesson from the Canada-US Free Trade Agreement," International Economic Journal, Taylor & Francis Journals, vol. 29(2), pages 307-326, June.
    12. Min Zhang, 2010. "Unemployment Insurance Eligibility, Moral Hazard and Equilibrium Unemployment," Working Papers tecipa-405, University of Toronto, Department of Economics.
    13. Masanori Kashiwagi, 2015. "The Cyclical Properties of Unemployment and Vacancies in Taiwan," Pacific Economic Review, Wiley Blackwell, vol. 20(4), pages 588-607, October.
    14. Yahong Zhang, 2011. "Financial Frictions, Financial Shocks and Labour Market Fluctuations in Canada," Discussion Papers 11-10, Bank of Canada.

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