On the Evidence of Non-Linear Structure in Canadian Unemployment.

In this paper, we focus on and examine the empirical evidence of non- linearity in aggregate Canadian unemployment. Contrary to the conclusion reached in Murray et al. (1993), and using a corrected for bias simple non-parametric test (SNT), we reject the null hypothesis of a linear structure for Canadian unemployment.Canada, Unemployment, Brock Dechert and Scheinkman (BDS) test, Simple Non-Paramteric Test (SNT), U-Statistics, Correlation Integral, Non-Linear Specification.

Can Sectoral Shifts Generate Persistent Unemployment in Real Business Cycle Models?

This paper extends the standard Real Business Cycle model to incorporate sectoral shifts in unemployment. Using relative sectoral technology and sectoral tastes shocks, combined with labor adjustment costs across sectors, we assess the possibility of generating persistent aggregate unemployment. Calibrated to Canadian data, the models suggest that the introduction of sectoral labor mobility with adjustment costs improves the ability of the standard real business cycle model to match the observed persistence in unemployment. Empirically, we estimated a Vector Auto-Regressive model and successfully matched the models' overshooting of labor. The results suggest that government policies aimed to alleviate the unemployment burden should pay closer attention to sectoral phenomena, specifically to sectoral labor mobility.Real Business Cycle (RBC), Sectoral Shocks, Unemployment Persistence, Vector Auto-Regressive (VAR), Blanchard-Quah (B-Q) Identification

Testing and Estimating Persistence in Canadian Unemployment.

A vital implication of unemployment persistence applies to the Bank of Canada's disinflation policies since it adversely influences unemployment and considerably lengthens recessions. This paper tests for persistence in Canadian sectoral unemployment, using the modified rescaled-range test. Our results show evidence of persistence in sectoral unemployment that translates to persistence in aggregate unemployment. To quantify this aggregate-level persistence, we estimate it within the framework of Bayesian ARFIMA class of models. The results conclude that Canadian unemployment exhibits persistence in the short and intermediate run.ARFIMA, Fractional Integrated, Bayesian, Unemployment Persistence, Canada, Rescaled-Range Statistic

A Dynamic Model of Bargaining in a Unionized Firm with Irreversible Investment

This paper develops a dynamic model of bargaining between a firm and union. Capital is assumed to be firm-specific, so only nonnegative investments are possible. Collective bargaining contracts specify the level of the wage rate that will prevail for a fixed contract length, while the firm unilaterally chooses employment. Two types of equilibria are considered. In one equilibrium, the wage-employment outcomes lie on the marginal revenue product of labor curve and the wage is determined by a generalized Nash bargain. This equilibrium is Pareto inefficient. In another equilibrium, wage-employment pairs lie on the contract curve and wages are set above the marginal product of labor. In this equilibrium, the firm's desire to reduce employment strategies in which the union bargains tougher in the future and the Pareto inefficient equilibrium prevails. Existence results are established and the equilibria are characrerized for a particular specification of the firm's revenue function and the union's temporal utility function, using recursive methods. The model is calibrated on stylized facts from the U.S. economy. It turns out that the calibrated model can account for several other stylized facts; in particular, the relatively low variability of the wage rate and the countercyclicality of the union wage premium. Moreover, it is found that irreversibilities are crucial in this respect, in the ergodic as well as the nonergodic states.