The table below uses data for the year 2003, adjusted to be comparable to each o

Question

The table below uses data for the year 2003, adjusted to be comparable to each other. All population values are in thousands. Fill in the blanks in the table above. In part a, you should have found that the unemployment rates of the three countries differ significantly from one another. Which of the following are possible reasons why the countries might have different unemployment rates. Germany could be in a recession and have higher cyclical unemployment, Germany could have more powerful unions, Germany could have higher (and binding) minimum wages. Japan could have a more liberalized labor market leading to lower frictional unemployment, Germany and France could have more generous unemployment benefits Germany and France could have less generous unemployment benefits, Germany could have no minimum wage. Germany could be in an expansion and have lower cyclical unemployment.

Explanation / Answer

Labor force = employed + unemployed.

Unemployment rate = number of unemployed/labor force.

Labor force participation rate = labor force / adult population.

If a country would be into recession then the labor force participation would be high along with high unemployment rate. Germany has the lowest labor force participation rate as well as marginally high unemployment. So this could not be a situation of recession. Again having strong trade union would mean more unemployment with high labor force participation rate, which is not the case. The best alternative amongst this related to Germany is that it may have no minimun wages. Because of which most of the labor force is into employment and hardly 9.7% is unemployed. Japan could have more liberalized economy with less frictional unemployment, assuming this is very reasonable.

country adult pop. labor force employed unemployed unemployment rate labor force participation rate japan 109474 66010 62510 3500 5.3 60.29 france 46812 26870 24293 2577 9.6 57.4 germany 70159 39591 35751 3840 9.7 56.4

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