11F_A2_Sol

# 11F_A2_Sol - Econ 204 Instructor J Li ASSIGNMENT 2 ANSWERS...

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Econ 204 Instructor: J. Li Page 1 of 9 ASSIGNMENT 2 ANSWERS Oct 2011 1. Empirical Part: Unemployment (a) Find: the CANSIM series labels; 1990-2009 averages and deviations for series (1) & (2). Table 1: Canadian Unemployment Rates – Summary Statistics Series No. Average Standard Dev. Male 15+ V2062824 8.66 1.72 Female 15+ V2062833 7.80 1.51 Male and Female 15+ V2062815 8.26 1.61 Male and Female 15-24 V2062842 14.16 1.86 +0.25 for each series number; +0.25 for each average; +0.25 for each standard deviation. (b) Plot: series (1) against (2). +0.5 for each series Figure 1 plots monthly unemployment rates for (1) men 15+; and (2) women 15+. That is, we are comparing the unemployment rates for working age population between genders. Inspect: whether the cyclical features are symmetric? – No. +0.25 From Figure 1 unemployment rises very rapidly at the start of recessions and falls slowly as the economy subsequently expands. +0.5 This means that the effects of a recession are persistent. +0.25 (c) Find: the difference between the female and male unemployment rate during recessions. While the average level of male unemployment is in general higher than that for females, +1 the volatility as measured by the standard deviation is also higher for males than for females. +1 It 0 2 4 6 8 10 12 14 Time Figure 1 Unemployment Rates for Canada Men 15+ Women 15+ Percent

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Econ 204 Instructor: J. Li Page 2 of 9 appears that in peak unemployment periods (recessions), female unemployment does not rise as high. +0.5 This is particularly noticeable in the early 1990s and late 2000s. Explain: the difference. One possible explanation is that in recessions, female labour participation falls or slows in growth. +0.5 Another possibility is that male employment is typically in more cyclically sensitive areas (for example, manufacturing versus services). +0.5 (d) Find: the CANSIM series labels; 1990-2009 averages and deviations for series (3) & (4). See lower half of Table 1. Plot: series (3) against (4). +0.25 for each series Figure 2 plots the unemployment rates for (3) men and women 15+ and (4) men and women 15- 24. That is, we are comparing the unemployment rate for the entire working age population to that for young people. The average unemployment rates are reported in the last two rows of Table 1. Explain: the difference between total unemployment rate and the unemployment rate for young people? From Table 1 (and from inspection of Figure 2) we see that the unemployment rate for young people is much higher than for the total working age population. (It is also much more variable, which is also of some interest.) There are a number of possible explanations for this. (i) Frictional unemployment Young workers are likely to have fairly high rates of job separation. +0.25 Young workers typically will not have much seniority, which means they are more likely to be laid off during downturns. As well, they will still be learning about employment opportunities and may have a higher propensity to quit a job. Finally, as young people typically do not have dependents, the 0 2 4 6 8 10 12 14 16 18 20 Time Figure 2 Unemployment Rates Total 15-24 Total 15+ Percen
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11F_A2_Sol - Econ 204 Instructor J Li ASSIGNMENT 2 ANSWERS...

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