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What goes up sometimes stays up: shocks and institutions as determinants of unemployment persistence

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  • Gianni Amisano
  • Massimiliano Serati

Abstract

We analyse the determinants of unemployment persistence in four OECD countries by estimating a structural Bayesian VAR with an informative prior based on an insiders/outsiders model. We explicitly insert unemployment benefits and labour taxes so that our identification is not affected by the Faust and Leeper (1997) critique. We find widespread hysteresis: demand shocks play a dominant role in explaining unemployment also in the medium-run. Moreover real wages have low sensitivity to cyclical fluctuations and to labour market disequilibria. Our results emphasise the real power of the unions and their interactions with structural shocks and other institutions as crucial determinants of hysteresis. Copyright (c) Scottish Economic Society 2003.

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Bibliographic Info

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 50 (2003)
Issue (Month): 4 (09)
Pages: 440-470

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Handle: RePEc:bla:scotjp:v:50:y:2003:i:4:p:440-470

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Cited by:
  1. Juan José Echavarría & Enrique López & Sergio Ocampo & Norberto Rodríguez, 2011. "Choques, instituciones laborales y desempleo en Colombia," BORRADORES DE ECONOMIA 009154, BANCO DE LA REPÚBLICA.
  2. Bassanini, Andrea, 2012. "Aggregate Earnings and Macroeconomic Shocks: The Role of Labour Market Policies and Institutions," IZA Discussion Papers 6918, Institute for the Study of Labor (IZA).
  3. BATTISTI,Michele, 2006. "Assessing persistence in the Italian rate of unemployment in presence of structural breaks and regional asymmetries, 1977 to 2004," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(3).
  4. Annika Alexius & Bertil Holmlund, 2007. "Monetary Policy and Swedish Unemployment Fluctuations," CESifo Working Paper Series 2044, CESifo Group Munich.
  5. Monastiriotis, Vassilis, 2006. "Macro-determinants of UK regional unemployment and the role of employment flexibility," MPRA Paper 44, University Library of Munich, Germany.
  6. Hjelm, Göran & Jönsson, Kristian, 2010. "In Search of a Method for Measuring the Output Gap of the Swedish Economy," Working Paper 115, National Institute of Economic Research.
  7. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
  8. Massimiliano Serati & Michela Martinoia, 2008. "The East-West migration in Europe: skill levels of migrants and their effects on the european labour market," LIUC Papers in Economics 208, Cattaneo University (LIUC).

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