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Hysteresis in Unemployment: Panel Unit Roots Tests Using State Level Data

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Author Info
Mohan, Ramesh
Kemegue, Francis
Sjuib, Fahlino

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Abstract

Most studies that use classical unit-root tests in OECD countries support the unemployment hysteresis hypothesis. However, similar classical tests performed on US data yield mixed results, uncovering specification issues. This study uses a number of panel unit root tests, which are known to overcome specification problems, to check the existence of hysteresis in unemployment data from three Massachusetts regions. The empirical results strongly reject a unit root in the unemployment rates, refuting the unemployment hysteresis hypothesis.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5580.

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Date of creation: 02 Nov 2007
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Handle: RePEc:pra:mprapa:5580

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Related research
Keywords: Hysteresis; Unemployment; panel unit root test;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

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  1. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
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  2. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March. [Downloadable!] (restricted)
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  3. Miguel A. León-Ledesma, 2000. "Unemployment Hysteresis in the US and the EU: a Panel Data Approach," Studies in Economics 0006, Department of Economics, University of Kent. [Downloadable!]
  4. Roed, Knut, 1996. "Unemployment Hysteresis--Macro Evidence from 16 OECD Countries," Empirical Economics, Springer, vol. 21(4), pages 589-600.
  5. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May. [Downloadable!] (restricted)
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  6. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I. [Downloadable!] (restricted)
  7. Moon, H.R. & Perron, B. & Phillips, P.C.B., 2006. "On The Breitung Test For Panel Unit Roots And Local Asymptotic Power," Econometric Theory, Cambridge University Press, vol. 22(06), pages 1179-1190, December. [Downloadable!]
  8. Hall, Robert E., 1979. "A theory of the natural unemployment rate and the duration of employment," Journal of Monetary Economics, Elsevier, vol. 5(2), pages 153-169, April. [Downloadable!] (restricted)
  9. Mitchell, William F, 1993. "Testing for Unit Roots and Persistence in OECD Unemployment Rates," Applied Economics, Taylor and Francis Journals, vol. 25(12), pages 1489-1501, December.
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