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Unemployment Hysteresis: Attached or Mismatched?

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  • Onur Özdemir

Abstract

This paper investigates the empirical significance of the unemployment problem whether it is structural or temporary on the basis of region-based, income-based and aggregate classifications of different countries for the yearly data from 1991 to 2018. In the first part of the paper, we examine the stationary position of unemployment series by way of using individual unit-root tests. Since the series are possibly subjected to the structural breaks, we also use additional approaches in which the effects of the break dates are checked in the analysis. Furthermore, we compare the initial findings of univariate unit-root tests along with panel unit-root testing procedures to critically assess the statistical validity of the hysteresis hypothesis in unemployment for given samples. The empirical findings imply that we cannot reject the hysteresis hypothesis for different classifications of the countries against the alternative of a natural rate even in the presence of structural breaks. JEL Codes - C10; E20; E24

Suggested Citation

  • Onur Özdemir, 2021. "Unemployment Hysteresis: Attached or Mismatched?," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 68(1), pages 1-24, March.
    • Handle: RePEc:aic:saebjn:v:68:y:2021:i:1:p:1-24:n:204
    DOI: 10.47743/saeb-2021-0005
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    More about this item

    Keywords

    hysteresis; unemployment rate; individual unit-root test; panel unit-root test; structural break;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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