ECO100Y1 Lecture Notes - Lecture 21: Unemployment, Nairu, Output Gap
Document Summary
[ragan, chapter 31, nairu, the "non-accelerating inflation rate of unemployment": all unemployment is either frictional or structural, no cyclical unemployment, or unemployment due to deficient ad. At the natural rate of unemployment [or nairu]: real gdp = potential gdp recessionary gap = zero economy is at "full employment" Comment: by this measure u. s. economy is far weaker than in canada. Higher frictional or structural unemployment increases the natural rate of unemployment: as the percentage of young, unskilled workers increases, the natural rate increases. [more structural unemployment: as technological change increases, the natural rate increases [more structural and frictional unemployment, government policy [unintended consequences]: e. g. employment insurance. More government benefits, the less willing are unemployed workers to accept job offers [opportunity cost of job search falls] Some individuals work just long enough to qualify for employment insurance benefits [a rational decision, if dislike work] Answer: would increase unemployment, by discouraging the unemployed from leaving high unemployment regions.
