Special Issue of CPP on the
Canada-U.S. Unemployment Rate Gap

Edited by W.Craig Riddell and Andrew Sharpe

From Canada's viewpoint, one of the most important labour market developments in the past 15 years has been the divergence of the Canadian and American unemployment rates after 1981. From 1948 to 1981, the unemployment rate was, on average, the same as that in the United States. In the 1980s, the Canadian unemployment rate averaged more than 2 percentage points higher than the American rate, with the gap rising to 4 percentage points in the 1990s. Because of the many similarities between the two countries, we are naturally interested in knowing why the United States has been able to keep unemployment well below the Canadian level.

In 1995, the newly established Centre for the Study of Living Standards (CSLS) initiated a research project on the Canada-US unemployment rate gap. The project brought together labour economists from both Canada and the United States with the objective of shedding light on this important national issue. The special issue of Canadian Public Policy represents the outcome of the project. It contains revised versions of papers presented at a conference, cosponsored by the Canadian Employment Research Forum, held in Ottawa on February 9-10, 1996.

A key finding is that the unemployment gap of the 1980s and the further widening of the gap in the 1990s appear to have fundamentally different underlying causes. The gap of the 1980s was principally due to a relative change in how Canadians and Americans spend (or at least report) their time when not working, rather than to a relative decline in employment in Canada. The widening of the gap in the 1990s is principally due to Canada's much weaker aggregate economic growth during the 1990s, and the consequent steep relative decline in employment in Canada.

W.Graig Riddell is the Professor of Economics at the University of British Columbia and a fellow at the Canadian Institute for Advanced Research. Andrew Sharpe is Executive Director of the Centre for the Study of Living Standards in Ottawa.

Table of Contents

Preface

David Card
Preface

Introduction and Overview

W. Craig Riddel and Andrew Sharpe
The Canada-US Unemployment Rate Gap: Introduction and Overview

Aggregate and Regional Perspectives

Manfred Keil and Louis Pantuosco
Canadian and U.S. Unemployment Rates: A Comparison Based on Regional Data

Kevin Lang and Jay Zagorsky
Why Are Canadian and U.S. Unemployment Rates So Highly Correlated?

Labour Market Dynamics

Michael Baker, Miles Corak and Andrew Heisz
The Labour Market Dynamics of Unemployment Rates in Canada and the United States

Cédric Tille
Decomposition of the Unemployment Gap between Canada and the United States: Duration or Incidence?

Stephen R.G. Jones and W. Craig Riddell
Gross Flows of Labour in Canada and the United States

Labour Market Adjustment

Eswar Prasad and Alun Thomas
Labour Market Adjustment in Canada and the United States

Robert A. Amano and R. Tiff Macklem
Unemployment Persistence and Costly Labour Adjustment of Labour: A Canada-U.S. Comparison

David Gray and Gilles Grenier
Jobless Duration of Displaced Workers: A Comparison of Canada and the United States

Labour Supply and Skills

Peter Kuhn and A. Leslie Robb
Shifting Skill Demand and the Canada-U.S. Unemployment Rate Gap: Evidence from Prime-Age Men

Audra J. Bowlus
A Panel Data Analysis of the U.S. Canadian Nonemployment Rate Gap Among Young, Low Skilled Males

David Andolfatto, Paul Gomme and Paul Storer
U.S. Labour Market Policy and the Canada-U.S. Unemployment Rate Gap

Paul A. Storer and Marc A. Van Audenrode
Exploring the Links between Wage Inequality and Unemployment: A Comparison of Canada and the U.S.

Policy Implications of the Research Findings

Gary Burtless
Relative Unemployment in Canada and the United States: An Assessment

John Helliwell
The Unemployment Rate Gap: Results, New Questions, and Policy Implications

Munir Sheikh
Structural and Macro Policy and the Canada-U.S. Unemployment Rate Gap

Comments

Jean-Pierre Voyer
Policy Roundtable: Comment


List of Contributors

Robert A.Amano is an economist in the Research Department at the Bank of Canada.

David Andolfatto teaches in the Department of Economics at the University of Waterloo.

Mickel Baker teaches in the Department of Economics at the University of Toronto.

Audra J. Bowlus teaches in the Department of Economics at the University of Western Ontario.

Gary Burtless is as a Senior Fellow in the Economics Studies Program at the Brookings Institution.

Miles Corak is with the Business and Labour Market Analysis Division at Statistics Canada.

Paul Gomme teaches in the Department of Economics at Simon Fraser University.

David Gray teaches in the Department of Economics at the University of Ottawa.

Gilles Grenier is Professor of Economics at the University of Ottawa.

Andrew Heisz is with the Business and Labour Market Analysis Division at Statistics Canada.

John Helliwell is Professor of Economics at the University of British Columbia.

Stephen R.G.Jones is Professor of Economics at McMaster University.

Manfred Keil teaches in the Department of Economics at Claremont McKenna College.

Peter Kuhn is Professor of Economics at McMaster University.

Kevin Lang is Professor of Economics at Boston University.

R.Tiff Macklem is an economist in the Research Department of the Bank of Canada.

Louis Pantuosco teaches in the College of Business Administration at Wintrrop University.

Eswar Prasad is an economist at the International Monetary Fund.

A.Leslie Robb is Professor of Economics at McMaster University.

Munir Sheikh is General Director in the Tax Policy Branch at Finance Canada.

Paul A.Storer teaches in the Department of Economics at Western Washington University.

Alun Thomas is an economist at the International Monetary Fund.

Cédric Tille is a doctoral candidate in the Department of Economics at Princeton University.

Marc A.Van Audenrode teaches in the Department d'économique, Université Laval.

Jean-Pierre Voyer is Director General in the Applied Researrch Branch at Human Resources Development Canada.

Jay Zagorsky is with the Centre for Human Resource Research at Ohio State University.



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