Hysteresis and Persistence in the Course of Unemployment: The EU and US Experience
AbstractWe investigate hysteresis and persistence behaviour in the course of unemployment in EU countries and US states by means of first and second generation panel unit root tests. While the former tests assume independent cross sections, the latter control for dependencies. The first generation tests indicate, that unemployment is persistent, but nevertheless stationary. Second generation tests reveal mixed results, but the evidence for stationarity is much stronger for the US. Hysteresis in EU unemployment is attributed to the idiosyncratic, but not to the common component. In contrast, idiosyncratic components are stationary in the US. If hysteresis behaviour is also relevant here, it is more likely to arise in the common component. These findings might reflect a lower degree of migration of the unemployed in the EU from starving into prosperous regions, possibly because of language barriers or national labour market regulations
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 572.
Length: 18 p.
Date of creation: 2006
Date of revision:
Publication status: Published in: Spanish Economic Review 11 (2009), 4, 267-276
Unemployment persistence; hysteresis; panel unit roots;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-29 (All new papers)
- NEP-EEC-2006-04-29 (European Economics)
- NEP-LAB-2006-04-29 (Labour Economics)
- NEP-MAC-2006-04-29 (Macroeconomics)
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