STRUCTURAL UNEMPLOYMENT AND DISEQUILIBRIUM

In this paper, we present a disequilibrium model of the labor market w hich allows us to distinguish cyclical unemployment due to wage rigidi ty from structural unemployment. This is done through the insertion, i n the exchange condition of an aggregate disequilibrium model, of vari ables measuring mismatch between disaggregated labor supplies and labo r demands. Such a model also allows unemployment and job vacancies to coexist. The model is estimated using Canadian quarterly data from 196 6 to 1983. Our results imply that structural unemployment due to inter -industrial shocks while significant is fairly small.