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Endogeneity in Structural Unemployment Equations: The Case of Canada
Author:
International Monetary Fund
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Series:
IMF Working Papers
Volume/Issue:
Volume 1993: Issue 094
Language:
English
Publication Date:
01 Dec 1993
DOI:
https://doi.org/10.5089/9781451950694.001
ISBN:
9781451950694
ISSN:
1018-5941
Pages:
30
Keywords:
WP; replacement rate; unemployment rate equation; UI system; UI account; unemployment equation; UI premium; UI reform; Unemployment rate; Minimum wages; Unemployment; Labor costs; Labor unions
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund