A Study Attempts to Investigate the Role of the Various

question 44

Essay

A study attempts to investigate the role of the various determinants of regional Canadian unemployment rates in order to get a better picture of Canadian aggregate unemployment rate behavior. The annual data (1967-1991)is for five regions (Atlantic region, Quebec, Ontario, Prairies, and British Columbia), and four age-gender groups (female and male, adult and young). Focusing on young females, the authors find significant effects for the following variables: the regional relative minimum wage rate (minimum wages divided by average hourly earnings), the regional share of youth in the labor force, the regional share of adult females in the labor force, United States activity shocks (deviations of United States GDP from trend), an indicator of the degree of monetary tightness in Canada, regional union density, and a regional index of unemployment insurance generosity. Explain why the authors only used region fixed effects. How would their specification have to change if they also employed time fixed effects?

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Definitions:

Outcome Expectancies

Beliefs about the consequences of certain behaviors, which can influence an individual's motivation and actions.

Self-Fulfilling Prophecy

A belief that comes true because we are acting as if it is already true.

Goal-Directed Behavior

Goal-directed behavior is behavior that is initiated and guided by intentions and plans to achieve a specific objective.

Psychological Adjustment

The process of achieving mental and emotional balance or adapting to new situations, conditions, or environments.