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The government of Canada, to reduce the unemployment rate, has announced to give a payment q...

The government of Canada, to reduce the unemployment rate, has announced to give a payment q to the worker who lost their jobs due to COVID-19 pandemic for staying home and not searching for the job. Since anyone who chooses not to search for a job is considered not in the labor force hence lowers the unemployment rate. You as a federal policy economist believe that a better policy to reduce the unemployment rate is that the government should give a subsidy s to any firm that hires a worker. Using the two-sided search model explain that your proposed policy is more effective in achieving the government’s goal of reducing the unemployment rate.

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Rahul Sunny answered 2 years ago
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