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Persistence of Unemployment in the Canadian Provinces

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  • Firouz Fallahi
  • Gabriel Rodríguez

Abstract

The authors analyze the degree of persistence of the unemployment rates of the ten Canadian provinces using quarterly data for the period 1976:1–2005:4. They apply a two-break minimum Lagrange Multiplier (LM) unit root statistic, which, unlike standard unit root statistics (without or with breaks), makes it possible to find the stationarity of the different unemployment rates, giving support to the theory of the natural rate. The authors use the methodology of Bai and Perron (1998, 2003) to estimate a linear model with multiple structural changes to estimate the different degrees of persistence over the different regimes. The results suggest that the degree of persistence decreases when multiple breaks are allowed. Issues regarding the Canadian labor market, the insurance benefits program, interprovincial transfers, and interprovincial mobility are discussed as potential explanations for the results.

Suggested Citation

  • Firouz Fallahi & Gabriel Rodríguez, 2011. "Persistence of Unemployment in the Canadian Provinces," International Regional Science Review, , vol. 34(4), pages 438-458, October.
    • Handle: RePEc:sae:inrsre:v:34:y:2011:i:4:p:438-458
    DOI: 10.1177/0160017610383280
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    Cited by:

    1. Shannon, Mike & Moazzami, Bakhtiar, 2015. "Canadian Regional NAIRU Estimates: A Structural Break Approach," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(1).
    2. Giorgio Canarella & Rangan Gupta & Stephen M. Miller & Stephen K. Pollard, 2019. "Unemployment rate hysteresis and the great recession: exploring the metropolitan evidence," Empirical Economics, Springer, vol. 56(1), pages 61-79, January.
    3. Firouz Fallahi & Gabriel Rodríguez, 2011. "Convergence In The Canadian Provinces: Evidence Using Unemployment Rates," Documentos de Trabajo / Working Papers 2011-322, Departamento de Economía - Pontificia Universidad Católica del Perú.
    4. Tolga Omay & Muhammad Shahbaz & Chris Stewart, 2021. "Is there really hysteresis in the OECD unemployment rates? New evidence using a Fourier panel unit root test," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(4), pages 875-901, November.
    5. Omay, Tolga & Shahbaz, Muhammad & Stewart, Chris, 2021. "Is There Really Hysteresis in OECD Countries’ Unemployment Rates? New Evidence Using a Fourier Panel Unit Root Test," MPRA Paper 107691, University Library of Munich, Germany, revised 10 May 2021.

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    More about this item

    Keywords

    persistence; unemployment; unit root; break dates; Canadian provinces;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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