Keywords: Natural rate, temporary employment, matching function
Abstract: This paper examines the determinants of the natural rate of unemployment using a
combined cross section and time series data set. The results suggest that industry composition
affects the natural rate. In particular, a higher share of temporary employment in a local labor
market tends to lower the natural rate of unemployment--most likely through the matching
function. The results suggest that the increase in the share of temporary employment may have
reduced the natural rate as much as 1/4 percentage point.
The results also indicate that unemployment insurance benefits tend to boost the natural
rate, while having a more highly educated work force tends to lower it. However, the degree of
union presence in a local labor market had little impact on the
Full paper (50 KB PDF)
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Last update: January 27, 2000