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Cyclical unemployment and the natural rate of unemployment are sometimes hard to distinguish from each other, so economists are not very confident about estimates of the natural rate of unemployment. Still, since unemployment rates are consistently higher in Canada and most Western European countries than in the United States, it appears that the natural rate of unemployment is lower in the United States. What might explain this difference?

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Chika Ilonah
Chika IlonahLv10
28 Sep 2019

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Related questions

The prevalence of "at-will" employment contracts in the United States likely causes

A. lower levels of cyclical unemployment in the United States compared to most European countries.

B. higher levels of cyclical unemployment in the United States compared to most European countries.

C. the natural rate of unemployment to be lower in the United States compared to most European countries.

D. the natural rate of unemployment to be higher in the United States compared to most European countries.

Long-term structural unemployment is higher in Europe than in the United States, but some European countries have it worse than others. Take a look at Table 30.1 in your text. Spain has a lower fraction of long-term unemployment than the other European countries, but a higher rate of unemployment than the other European countries in that table. What can you conclude about the kind of unemployment taking place in Spain?

9. The unemployment rate is typically lower in the United States than in most European countries, and the duration of unemployment in the United States is much less likely to be one year or more than in Europe. For example, in December 2016, the unemployment rate was 4.7 percent in the U.S. compared to 8.2 percent that same month for the countries in the European Union. France’s unemployment rate in December 2016 was 9.6 percent.

Separately consider each of the following differences between the United States and most European countries. Explain whether each difference—considered separately—should make the unemployment rate higher or lower in Europe (relative to the United States). Include as part of your answer the type of unemployment that the factor would affect.

a) The United States spends much less on government training programs than most of Europe.

b) European countries typically have strict job-protection policies that require notification to the government and consultations with worker representatives before layoffs can be made.

c) In many European countries, workers are eligible for relatively-generous unemployment payments that often last for a year or longer. These unemployment payments can equal 70 percent of the wages that had been earned. Furthermore, some European countries generously provide income through social insurance programs even after eligibility for unemployment payments has been exhausted.

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