Labor Market Behavior Differences between the Young and Old in a Search Theoretical Model

This paper studies the labor market behavior differences across different age groups in Canada. I use data from 2000 to 2024, which includes the Great Recession and the Covid-19 recession, to conduct analysis. The data show that compared to the older workers, young workers not only have a much higher unemployment rate, but also a higher job finding rate and job separation rate. The volatilities in the unemployment and separation rates for the young workers are also much higher than those for the older workers. I then use a labor search model to study the differences. I calibrate the model to the Canadian data and simulate the model assuming the economy is subject to a productivity shock. I find that there are significant labor market differences between young workers and older workers: In particular, the response in the unemployment rate of the young workers to the shock is much more pronounced compared to the older age groups. I also find that the labor market differences between young and old workers are mainly caused by the differences in the job finding rate.