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Unemployment Rate and the Real Wage Behavoir: A Neoclassical Hint for the Colombian Labor Market Adjustment

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  • Luis Eduardo Arango

    ()

  • Carlos Esteban Posada

    ()

Abstract

The colombian urban unemployment rate grew dramatically over the last six years. At the same time the real wage also had a sharp increase: The empirical evidence supports the hypothesis that an exogenous increase in the real wage was a cause of the unemployment growth. The long-run elasticity suggest that one percent increase of the real wage index increases unemployment rate something between 0.7 and 1.0 percent. Therefore it seems necessary that real wage comes back to its equilibrium path for the reduction of the unemployment rate to the natural level.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 180.

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Handle: RePEc:bdr:borrec:180

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Keywords: Unemployment rate; real wage; cointegration; long-run elasticities.;

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References

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  1. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  2. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  3. Balmaseda, Manuel & Dolado, Juan J & Lopez-Salido, J David, 2000. "The Dynamic Effects of Shocks to Labour Markets: Evidence from OECD Countries," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 3-23, January.
  4. Luis Eduardo Arango & Carlos Esteban Posada, . "El Desempleo en Colombia," Borradores de Economia 176, Banco de la Republica de Colombia.
  5. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  6. Bardsen, Gunnar, 1992. "Dynamic modeling of the demand for narrow money in Norway," Journal of Policy Modeling, Elsevier, vol. 14(3), pages 363-393, June.
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Citations

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Cited by:
  1. Ana Maria Iregui & Jesus Otero, 2003. "On the dynamics of unemployment in a developing economy: Colombia," Applied Economics Letters, Taylor & Francis Journals, vol. 10(14), pages 895-898.
  2. Luis Eduardo Arango & Carlos Esteban Posada, . "La Tasa de Desempleo de Largo Plazo en Colombia," Borradores de Economia 388, Banco de la Republica de Colombia.
  3. Jesús Otero & Luis Fernando Gamboa & Andrés García-Suaza, 2011. "An analysis of the relationship between wages in the public and private sector in colombia: a panel data approach," DOCUMENTOS DE TRABAJO 008738, UNIVERSIDAD DEL ROSARIO.
  4. Ricardo Bonilla González & Jorge Iván González, 2006. "Bien-estar y macroeconomía 2002-2006: el crecimiento inequitativo no es sostenible," PUBLICACIONES - CID 002064, UN - RCE - CID.
  5. Luis Eduardo Arango & Carlos Esteban Posada, . "The Time-Varying Long-Run Unemployment Rate: The Colombian Case," Borradores de Economia 389, Banco de la Republica de Colombia.
  6. Arroyo, José Santiago & Aponte, Elizabeth & Duque, Henry & Florez, Jaime, 2005. "Inflación y desempleo: ejercicio econométrico para Cali-Colombia
    [Inflation and Unemployment: econometric exercise for Cali-Colombia]
    ," MPRA Paper 15577, University Library of Munich, Germany, revised Jul 2005.
  7. Cecilia Albert Verdú & Carlos Giovanni González Espitia & Jhon James Mora Rodríguez, 2013. "Determinantes de la demanda de educación universitaria en Colombia, 1980-2010," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 15(29), pages 169-194, July-Dece.
  8. Rodrigo Taborda & Juan Carlos Guataqui, 2003. "Firm level evidence of efficiency wages and labor turnover in Colombia's manufacturing industry," BORRADORES DE INVESTIGACIÓN 002729, UNIVERSIDAD DEL ROSARIO.
  9. Miguel Urrutia & Mauricio Ruíz, 2010. "Ciento setenta años de salarios reales en Colombia," DOCUMENTOS CEDE 007090, UNIVERSIDAD DE LOS ANDES-CEDE.
  10. James Alm & Hugo López Castaño, 2002. "Payroll taxes in Colombia," WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO 003316, FEDESARROLLO.

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