Does Hysteresis in Unemployment Occur in OECD Countries? Evidence from Parametric and Non-Parametric Panel Unit Roots Tests
AbstractThis study tests the hysteresis hypothesis of unemployment in fourteen OECD countries by examining the stationarity of unemployment rates using several panel unit root tests. Empirical results show that the hysteresis hypothesis cannot be rejected for majority of the OECD when the tests are conducted on the basis of individual countries. However, rejection is obtained when cross-country interdependence in unemployment rates is incorporated in the estimation. Therefore, it is crucial to consider the cross-country labor markets interdependence when testing the hysteresis hypothesis as the labor market institutions and the stabilization policy of the labor markets in these OECD countries can play an important role in maintaining the unemployment to sustainable levels.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 9915.
Date of creation: 2009
Date of revision:
Unemployment; Hysteresis Hypothesis; Panel Unit Root Test; Parametric Test; Non-Parametric Test; OECD;
Find related papers by JEL classification:
- N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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