Unemployment and labor force participation in Canada

ABSTRACT

We examine the long run relationship between labour force participation and unemployment rate in Canada using data from 1975M01 to 2019M12. A cointegration analysis is conducted at the aggregate, across gender, and by age. Support is found for an added worker affect for males and a discouraged worker effect for females. Findings by age reveal that the working age females exhibits the discouraged effect. However, we cannot confirm the added worker effect for any male age groups.

KEYWORDS:

• Unemployment
• labour force participation
• cointegration
• discouraged worker effect

JEL CLASSIFICATION:

• E24
• J60

Acknowledgments

I thank an anonymous referee for valuable feedback

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Numerous papers examining these topics exists. As examples using Canadian data, one can see Jones, Nielson, and Popiel (2014) for the impact of unemployment on voting, Ariizumi and Schirle (2012) for the effects of on employment on mortality rates, and Janko and Popli (2015) for the impact of unemployment rate on crime.

² Kakinaka and Miyamoto (2012) use three broad age groups for Japan.

³ The $U_t$ and $LF{P}_t$ data used in this paper for all, by gender, and by age are obtained from Statistics Canada Table: 14–10-0287-02.

⁴ We use unit root tests commonly reported in this literature.

⁵ Our quantitative parameter estimates are slightly lower.

⁶ We conduct similar tests for the estimates in Table 3, and all restrictions are rejected. For brevity these results are available upon request.