Testing for hysteresis : unemployment persistence and wage adjustment
AbstractThis paper proposes a new testing strategy for unemployment hysteris as the joint restriction of a unit-root in the unemployment rate and no-effect of the level of unemployment in the Phillips wage equation. The relevant test statistics are derived when this joint restriction is imposed during estimation and when a sequential two steps testing strategy is adopted. The empirical application leads to rejection of the null hypothesis of wage hysteresis for most of our sample of OECD countries. We get an interesting contrast between the "core European countries" -rejecting hysteresis, but not unemployment non-stationarity- and the scandinavian ones where unemployment appears to be stabilized despite a lack of the wage correction.
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Bibliographic InfoPaper provided by CEPREMAP in its series CEPREMAP Working Papers (Couverture Orange) with number 9911.
Length: 28 pages
Date of creation: 1999
Date of revision:
Other versions of this item:
- P. Fève & P. Y. Hénin & P. Jolivaldt, 2003. "Testing for hysteresis: Unemployment persistence and wage adjustment," Empirical Economics, Springer, vol. 28(3), pages 535-552, July.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
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- Lee, Chien-Chiang & Chang, Chun-Ping, 2008. "Unemployment hysteresis in OECD countries: Centurial time series evidence with structural breaks," Economic Modelling, Elsevier, vol. 25(2), pages 312-325, March.
- Giray Gozgor, 2013. "Testing Unemployment Persistence in Central and Eastern European Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 3(3), pages 694-700.
- Luis Eduardo Arango & Carlos Esteban Posada, .
"El Desempleo en Colombia,"
Borradores de Economia
176, Banco de la Republica de Colombia.
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