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Persistence of Unemployment in the Canadian Provinces

Author

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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
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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. 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.

    More about this item

    Keywords

    persistence; unemployment; unit root; break dates; Canadian provinces;

    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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