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Wage Adjustment And Employment Persistency

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  • Andersen, Torben M.
  • Hylleberg, Svend

Abstract

Persistent high unemployment has fostered the employment persistency hypothesis according to which employment changes are driven by unanticipated shocks whereas anticipated shocks that potentially could change employment are absorbed by wage changes. Empirical tests of the persistency hypothesis fail to distinguish between the properties of shocks and endogenous propagation mechanism causing persistency. This paper develops a new test strategy by explicitly distinguishing between these two factors. The methodology is applied to the manufacturing sector in Denmark, and some support in favor of an endogenous propagation mechanism causing employment persistency is found.

Suggested Citation

  • Andersen, Torben M. & Hylleberg, Svend, 1998. "Wage Adjustment And Employment Persistency," Macroeconomic Dynamics, Cambridge University Press, vol. 2(4), pages 472-491, December.
  • Handle: RePEc:cup:macdyn:v:2:y:1998:i:04:p:472-491_00
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    Cited by:

    1. Linzert Tobias, 2004. "Sources of German Unemployment: Evidence from a Structural VAR Model / Die Hintergründe deutscher Arbeitslosigkeit: Evidenz von einem Strukturellen VAR," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 224(3), pages 317-336, June.
    2. Gil-Alana, L.A., 2008. "Testing of seasonal integration and cointegration with fractionally integrated techniques: An application to the Danish labour demand," Economic Modelling, Elsevier, vol. 25(2), pages 326-339, March.
    3. Linzert, Tobias, 2001. "Sources of German unemployment: evidence from a structural VAR model," ZEW Discussion Papers 01-41, ZEW - Leibniz Centre for European Economic Research.

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