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Sectoral shifts, stock market dispersion and unemployment in Canada

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  • Mario Fortin
  • Abdelkrim Araar

Abstract

Considerable attention has been given in the last ten years to estimation of the importance of sectoral shifts in explaining short-term fluctuations in unemployment. Recent studies have used US stock prices data to develop indexes of sectoral shocks less affected by cyclical influence than Lilien's employment dispersion index. Two indexes of sectoral shifts for Canada based on the sectoral dispersion of stock prices growth rates are calculated. These indexes are then used in unemployment equations incorporating variables measuring aggregate demand shocks and structural changes in order to assess the importance of sectoral and cyclical shocks in the determination of the Canadian unemployment rate. The estimation leads to the conclusion that the major recessions of 1981-82 and 1990-91 have been caused by aggregate demand shocks. However, both types of shocks contributed to the 1974-75 recession while the mild recession of 1980 was accompanied by an important sectoral shock. Estimations also show that the most important sectoral shock was in 1986, following the drop in energy prices, but a strong aggregate demand prevented any change in the unemployment rate at this time. The model also detects an important structural rise in the unemployment rate during the seventies. On the whole, the results show that, although sectoral shifts have the potential to induce short-term unemployment fluctuations, actual changes in the Canadian unemployment rate were mainly the consequences of monetary conditions and foreign demand for Canadian goods and services.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 29 (1997)
Issue (Month): 6 ()
Pages: 829-839

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Handle: RePEc:taf:applec:v:29:y:1997:i:6:p:829-839

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Cited by:
  1. John Baldwin & Petr Hanel & David Sabourin, 2000. "Les déterminants des activités d’innovation dans les entreprises de fabrication canadiennes : le rôle des droits de propriété intellectuelle," Cahiers de recherche Statistique Canada No 11F, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  2. Giovanni Gallipoli & Gianluigi Pelloni, 2013. "Macroeconomic Effects of Job Reallocations: A Survey," Working Paper Series 37_13, The Rimini Centre for Economic Analysis.
  3. Pastore, Francesco, 2013. "Primum vivere… Industrial Change, Job Destruction and the Geographical Distribution of Unemployment," IZA Discussion Papers 7126, Institute for the Study of Labor (IZA).
  4. Francesco Pastore, 2012. "Primum vivere . . . industrial change, job destruction and the geographical distribution of unemployment," IZA Journal of European Labor Studies, Springer, vol. 1(1), pages 1-15, December.
  5. Mussida, Chiara & Pastore, Francesco, 2012. "Is There a Southern-Sclerosis? Worker Reallocation and Regional Unemployment in Italy," IZA Discussion Papers 6954, Institute for the Study of Labor (IZA).
  6. De Loo,Ivo, 1998. "Fables of Faubus?: Testing the Sectoral Shift Hypothesis in the Netherlands Using a Simplified Kalman Filter Model," Research Memorandum 002, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  7. Jinzhu Chen & Bharat Trehan & Prakash Kannan & Prakash Loungani, 2011. "New Evidenceon Cyclical and Structural Sources of Unemployment," IMF Working Papers 11/106, International Monetary Fund.
  8. Ivo De Loo, 2000. "The Applicability of the Sectoral Shift Hypothesis in the Netherlands," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 57-69, May.
  9. Francesco Pastore & Joanna Tyrowicz, 2013. "Polish high unemployment and spatial labor turnover. Insights from panel data analysis using unemployment registry data," Working Papers 2013-18, Faculty of Economic Sciences, University of Warsaw.
  10. Pastore, Francesco & Tyrowicz, Joanna, 2012. "Labour Turnover and the Spatial Distribution of Unemployment: A Panel Data Analysis Using Employment Registry Data," IZA Discussion Papers 7074, Institute for the Study of Labor (IZA).
  11. Giovanni Gallipoli & Gianluigi Pelloni, 2008. "Aggregate Shocks vs Reallocation Shocks: an Appraisal of the Applied Literature," Working Paper Series 27-08, The Rimini Centre for Economic Analysis, revised Jan 2008.
  12. Paul Makdissi & Cyril Téjédo, 2000. "Problèmes d’appariement et politique de l’emploi," Cahiers de recherche 00-04, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.

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