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Convergence In The Canadian Provinces: Evidence Using Unemployment Rates

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  • Firouz Fallahi

    (University of Tabriz, Irán)

  • Gabriel Rodríguez

    ()
    (Departamento de Economía - Pontificia Universidad Católica del Perú)

Abstract

Quarterly time series data from Canada and the Canadian provinces for the period 1976:1-2005:3 are examined to determine if the unemployment rates in the Canadian provinces are converging to the national rate of unemployment. Firstly, we check for existence of stochastic convergence using recent unit root statistics, see Perron and Rodríguez (2003) and Rodríguez (2007). Secondly, we verify for existence of ??convergence using recently proposed methods by Vogel-sang (1998), Perron and Yabu (2009a, 2009b), and Bai and Perron (1998, 2003). Results from di¤erent unit root tests, without and with structural breaks, confirm that stochastic convergence exists in all provinces except British Columbia.The other results show strong evidence that deterministic convergence exists and the unemployment rates of the Canadian provinces are converging to the un-employment rate of Canada. This conclusion is stronger when multiple breaks are allowed in the trend function using the approach of Bai and Perron (1998,2003).

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Bibliographic Info

Paper provided by Departamento de Economía - Pontificia Universidad Católica del Perú in its series Documentos de Trabajo with number 2011-322.

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Length: pages
Date of creation: 2011
Date of revision:
Publication status: published
Handle: RePEc:pcp:pucwps:wp00322

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Keywords: Stochastic convergence; -convergence; unit roots; structural breaks; unemployment.;

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References

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  1. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
  2. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  3. Joseph DeJuan & Marc Tomljanovich, 2005. "Income convergence across Canadian provinces in the 20th century: Almost but not quite there," The Annals of Regional Science, Springer, vol. 39(3), pages 567-592, 09.
  4. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
  5. Firouz Fallahi & Gabriel Rodríguez, 2011. "Persistence of Unemployment in the Canadian Provinces," International Regional Science Review, , vol. 34(4), pages 438-458, October.
  6. Pierre Perron & Tomoyoshi Yabu, 2005. "Testing for Shifts in Trend with an Integrated or Stationary Noise Component," Boston University - Department of Economics - Working Papers Series WP2005-026, Boston University - Department of Economics.
  7. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-32, December.
  8. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
  9. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
  10. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  11. Andrew B. Bernard & Charles I. Jones, 1995. "Productivity and Convergence Across U.S. Industries," Working papers 95-4, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Mauro Costantini & Claudio Lupi, 2006. "Divergence and long-run equilibria in Italian regional unemployment," Applied Economics Letters, Taylor & Francis Journals, vol. 13(14), pages 899-904.
  13. Serge Coulombe & Kathleen M. Day, 1999. "Economic Growth and Regional Income Disparities in Canada and the Northern United States," Canadian Public Policy, University of Toronto Press, vol. 25(2), pages 155-178, June.
  14. Timothy J. Vogelsang, 1998. "Trend Function Hypothesis Testing in the Presence of Serial Correlation," Econometrica, Econometric Society, vol. 66(1), pages 123-148, January.
  15. Perron, Pierre & Yabu, Tomoyoshi, 2009. "Estimating deterministic trends with an integrated or stationary noise component," Journal of Econometrics, Elsevier, vol. 151(1), pages 56-69, July.
  16. Andrews, Donald W K, 1993. "Exactly Median-Unbiased Estimation of First Order Autoregressive/Unit Root Models," Econometrica, Econometric Society, vol. 61(1), pages 139-65, January.
  17. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  18. Serge Coulombe & Frank C. Lee, 1995. "Convergence across Canadian Provinces, 1961 to 1991," Canadian Journal of Economics, Canadian Economics Association, vol. 28(4a), pages 886-98, November.
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Cited by:
  1. Gabriel Rodríguez & Alfredo Vargas, 2012. "Impacto de expectativas políticas en los retornos del Índice General de la Bolsa de Valores de Lima," Revista Economía, Departamento de Economía - Pontificia Universidad Católica del Perú, vol. 35(70), pages 190-223.

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