Sectoral Shifts and Canadian Unemployment

Abstract

In this paper Lilien's (1982) hypothesis that sectoral shifts in employment raise aggregate unemployment is tested using Canadian quarterly data. Lilien's framework is extended to investigate regional labour market rigidities and to distinguish between industry shifts that are correlated with changes in aggregate activity, and those which are exogenous to the overall level of activity. The robustness of the results to various changes in model specification is also investigated. I find that in Canada exogenous shifts in employment between sectors do not have a significant effect on the aggregate unemployment rate.