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The Sources of Unemployment in Canada, 1967-1991: Evidence from a Panel of Regions and Demographic Groups

Our paper analyzes the determinants of unemployment rates in Canada. The theoritical framework incorporates "demande-side" as well as "supply-side" variables: the interest rate, federal spending, taxation, foreign activity, minimum wages, union density, demographic pressure, unemployment insurance, the terms of trade. The unemployment model is estimated with 500 observations for 5 Canadian regions and 4 demographic groups over the 25-year period 1967-1991. The purpose is to provide a comprehensive picture of the macroeconomic and structural causes of Canadian unemployment with a unique data set combining the respective advantages of macroeconomic time series and microeconomic cross sections. The long-term rise in Canadian unemployment since the 1960s is attributed, in descending order, to higher real interest rates, to the UI reform of 1972 (or what remains of it), and to slighly adverse net demographic pressure. Divergent trends in the first two of these factors in Canada and the United States would seem to explain much of the gap that emerged between the unemployment rates of the two countries in the past two decades. Notre étude analyse les sources du chômage au Canada. Le cadre théorique incorpore des facteurs de demande tout comme des facteurs d'offre: le taux d'intérêt, la dépense fédérale, la fiscalité, l'activité étrangère, le salaire minimum, le taux de syndicalisation, la pression démographique, l'assurance- chômage, les termes d'échange. Le modèle de chômage est estimé au moyen de 500 observations longitudinales portant sur 5 régions canadiennes et 4 grands groupes démographiques pour la période de 25 ans allant de 1967 à 1991. Notre but est de fournir une image complète et détaillée des causes macroécononiques et structurelles du chômage au Canada. Nous exploitons à cette fin un ensemble de données qui conjugue les avantages des séries temporelles macroéconomiques avec ceux des coupes transversales microéconomiques. Dans l'ordre décroissant, nous attribuons l'augmentation tendancielle du chômage observée au Canada depuis les années 1960 à la hausse des taux d'intérêt réels, à la réforme de l'assurance-chômage de 1972 (ou à ce qu'il en reste) et à une évolution démographique nette légèrement défavorable. L'évolution différente des deux premiers facteurs au Canada et aux Etats- Unis explique sans doute une bonne partie des tendances divergentes des taux de chômage des deux pays au cours des deux dernières décennies.

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Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 36.

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Length: 27 pages
Date of creation: Mar 1995
Date of revision:
Handle: RePEc:cre:crefwp:36
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