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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page Temporary Employment and the Natural Rate of Unemployment
Maria Ward Otoo

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 natural rate.

Keywords: Natural rate, temporary employment, matching function

Full paper (50 KB PDF)

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Last update: January 27, 2000