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Why Is French Equilibrium Unemployment So High?

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Abstract

Unemployment in France rose steadily from the early-seventies to the mid-eighties. Since the mid-eighties it has continued to experience fluctuations around a very high average level. Equilibrium unemployment theories are a useful framework within which to account for these developments. A multivariate estimation of the WS-PS model on macroeconomic quarterly data, which includes a larger number of potential unemployment determinants than earlier work, allows an enriched reading of the rise in French unemployment and of its persistence at a high level. We estimated it using a conditional VAR-ECM model, which is based upon the weak exogeneity properties of variables over the 1970-1/1996-4 period. The rise in equilibrium unemployment by 10 points in 25 years can essentially be explained by the rise in tax and social wedge, the slowdown in labour productivity and the deterioration of job security. Terms of exchange and skill mismatch account for only a slim part of the rise in equilibrium unemployment.

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Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): VI (2003)
Issue (Month): (May)
Pages: 127-156

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Handle: RePEc:cem:jaecon:v:6:y:2003:n:1:p:127-156

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Keywords: labour market; WS-PS model; equilibrium unemployment; cointegration; conditional VAR-ECM model;

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  1. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 32(2), pages 573-619, June.
  2. Boswijk, Peter & Franses, Philip Hans, 1992. "Dynamic Specification and Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 54(3), pages 369-81, August.
  3. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198288107, October.
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Cited by:
  1. Alexius, Annika & Holmlund, Bertil, 2007. "Monetary Policy and Swedish Unemployment Fluctuations," Economics Discussion Papers, Kiel Institute for the World Economy 2007-34, Kiel Institute for the World Economy.
  2. Arouri, Mohamed El Hedi & Ben Youssef, Adel & M'henni, Hatem & Rault, Christophe, 2014. "Exploring the Causality Links between Energy and Employment in African Countries," IZA Discussion Papers 8296, Institute for the Study of Labor (IZA).
  3. Frédéric Reynès & Paola Veroni & Aurélien Gaimon & Vincent Lapegue & Noé N'Semi & Maël Theulière, 2008. "Does the interaction between shocks and institutions solve the OECD shocks and institutions solve the OECD Unemployment Puzzle ? A Theoritical and Empirical Appraisal," Sciences Po publications, Sciences Po info:hdl:2441/9726, Sciences Po.
  4. Noé N'Semi & Aurélien Gaimon & Maël Theulière & Vincent Lapegue & Frédéric Reynès & Paola Veroni, 2007. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle ? A theoretical and empirical appraisal," Sciences Po publications, Sciences Po 2007-34, Sciences Po.
  5. Mohamed El Hedi Arouri & Adel Ben Youssef & Hatem M'Henni & Christophe Rault, 2014. "Energy use and economic growth in Africa: a panel Granger-causality investigation," Economics Bulletin, AccessEcon, vol. 34(2), pages 1247-1258.
  6. Mohamed El Hedi Arouri & Adel Ben Youssef & Hatem M'Henni & Christophe Rault, 2012. "Energy Consumption, Economic Growth and CO2 Emissions in Middle East and North African Countries," CESifo Working Paper Series, CESifo Group Munich 3726, CESifo Group Munich.
  7. Caporale, Guglielmo Maria & Rault, Christophe & Sova, Robert & Sova, Anamaria, 2014. "Financial Development and Economic Growth: Evidence from Ten New EU Members," IZA Discussion Papers 8397, Institute for the Study of Labor (IZA).

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