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Unemployment invariance hypothesis, added and discouraged worker effects in Canada

Author

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  • Aysit Tansel
  • Zeynel Abidin Ozdemir

Abstract

Purpose - The purpose of this paper is to explore the long-run relationship between unemployment rate (UR) and labor force participation rate (LFPR) for men and women in Canada. Given that there are differences in the URs and participation rates of men and women, the authors perform separate analysis for them also. Design/methodology/approach - The authors use co-integration analysis to investigate the existence of a long-run relationship between UR and LFPR in Canada using time series monthly data for the past 40 years. Findings - The finding that there is long-run relationship between UR and LFPR leads the authors to doubt the pertinence of the unemployment invariance hypothesis for Canada. The authors further find evidence for added-worker effect for men and discouraged-worker effect for women in Canada and the authors elaborate on the possible explanations for this seemingly contradictory finding. Practical implications - The lack of support for the unemployment invariance hypotheses implies that changes in the participation rate which may be due to aging population, policies of early retirement or constraints on working time will affect the UR in the long run. Originality/value - This paper investigates the unemployment invariance hypothesis in Canada to come up with policy implications about long-run UR. The authors further elaborate on the possible explanations for the added-worker effect for men and the discouraged-worker effect for women that the authors find in this study.

Suggested Citation

  • Aysit Tansel & Zeynel Abidin Ozdemir, 2018. "Unemployment invariance hypothesis, added and discouraged worker effects in Canada," International Journal of Manpower, Emerald Group Publishing Limited, vol. 39(7), pages 929-936, October.
    • Handle: RePEc:eme:ijmpps:ijm-04-2017-0059
    DOI: 10.1108/IJM-04-2017-0059
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    7. Yue Yin & Ye Jiang, 2023. "Fertility Effects of Labor Market Conditions at Graduation," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(4), pages 120-152, July.
    8. Moundir Lassassi & Aysit Tansel, 2020. "Female labor force participation in five selected MENA countries: An age-period-cohort analysis," Koç University-TUSIAD Economic Research Forum Working Papers 2018, Koc University-TUSIAD Economic Research Forum.

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    More about this item

    Keywords

    Canada; Co-integration; Unemployment; Added-worker effect; Discouraged-worker effect; Labour force participation; Unemployment invariance; E24; J21; J64;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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