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

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Author Info
Luis Eduardo Arango ()
Carlos Esteban Posada ()

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

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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.
  2. 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. [Downloadable!] (restricted)
  3. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
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  4. Luis Eduardo Arango T. & Carlos Esteban Posada, 2001. "El Desempleo En Colombia," BORRADORES DE ECONOMIA 002495, BANCO DE LA REPÚBLICA. [Downloadable!]
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  5. Henrik Hansen & Søren Johansen, 1992. "Recursive Estimation in Cointegrated VAR-Models," Discussion Papers 92-13, University of Copenhagen. Department of Economics.
  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. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Ricardo Bonilla González & Jorge Iván González, 2006. "Bien-estar y macroeconomía 2002-2006: el crecimiento inequitativo no es sostenible," PUBLICACIONES 002064, UNIVERSIDAD NACIONAL DE COLOMBIA - CID. [Downloadable!]
  3. 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. [Downloadable!]
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