Abstract
This compilation of summaries of Working Papers released during July-December 1993 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period. Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street N.W., Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201
This paper examines the endogeneity of several structural variables that enter unemployment rate equations--the generosity of unemployment benefits, nonwage labor costs, the relative minimum wage, and the degree of unionization. The paper develops arguments explaining why the structural variables are endogenous in the context of the Canadian institutional setting and provides evidence of reverse causality in the form of Granger and Geweke causality tests. The structural unemployment rate equation is then estimated using instruments suggested by the structure of the Canadian labor market. The paper confirms the earlier finding (Coe, 1990) 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. The results indicate that nonwage labor costs and the minimum wage have a powerful impact on the unemployment rate, while the generosity of unemployment benefits has a relatively small impact.