Mingwei Yuan

Date of Award


Degree Type


Degree Name

Doctor of Philosophy


This thesis studies the effects of fiscal and labour market policies on the labour market activities. The study is based on a general equilibrium framework. The models considered in this thesis are built on the recent advances of growth models which incorporate labour market search/match activities. This study extends the previous models to address several important empirical issues.;In Chapter 1, an empirical study using multivariate vector autoregression (VAR) models shows that, in postwar U.S., employment and hours worked per worker respond differently to a temporary shock in government consumption. The shock raises hours worked per worker and reduces employment. The existing standard neoclassical growth models have mainly focused on total hours effects of a government spending shock, rather than separate employment and hours effects. In this chapter, we analyze the dynamic behaviour of employment and hours worked per worker in a stochastic general equilibrium model with a matching mechanism between vacancies and unemployed workers. The model is estimated for U.S. using the Generalized Methods of Moments (GMM) estimation technique and the responses of employment and hours worked per worker are qualitatively similar to those in the VAR models. An increase in government spending raises hours worked per worker, and crowds out private consumption due to a negative wealth effect. On the path converging towards the steady state, private consumption is below its long run average and increasing, which implies that the interest rate is above its long run average and declining. The higher interest rates lower the capital value of a hired worker to the firm, causing a reduction of job openings and consequently a decrease in employment.;Chapter 2 involves a study of quantifying the potential causes of the rising unemployment rate in Canada over the past three decades based on a general equilibrium catch model. Several policy variables which are considered to be influential to unemployment are incorporated in the model. They are labour income taxes, capital income taxes, payroll taxes, unemployment benefits, and advance notice and several payment regulations. In order to evaluate the relative importance of changes in government policies, we also consider the impact of changes in productivity growth. We find that fiscal and labour market policies have only a limited effect in the model economy.;Chapter 3 compares the cost-effectiveness of the Investment Tax Credit (ITC) program and the Payroll Tax Credit (PTC) program. The ITC increases employment by increasing marginal labour productivity, while the PTC increases employment by directly reducing labour cost. This chapter compares the consequences of an introduction of the Investment Tax Credit (ITC) program or the Payroll Tax Credit (PTC) program based on a general equilibrium search model. The results show that the ITC program leads to more employment opportunities than the PTC program. This finding is robust according to sensitivity analyses.



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