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Does Unemployment Hysteresis Exist in Economy of Iran?

Author

Listed:
  • Saeid Eisazadeh

    (Assistant Professor of Economics, Faculty of Economics and Social Sciences, Bu Ali Sina University)

  • Mahbobeh Tabarsi

    (M.A in Economics, Faculty of Economics and Social Sciences, Bu Ali Sina University, Hamadan, Iran)

Abstract

This paper aims to investigate the unemployment hysteresis hypothesis for Iran, by using annual data of actual unemployment rate, during period 1959-2011. We first apply traditional methods of unit root test without considering structural breaks such as ADF and Phillips and Perron (1988) tests and fail to reject the hysteresis hypothesis in unemployment time series. When one structural break is incorporated, we again fail to reject hysteresis hypothesis. Since the mentioned tests have little power, we employ unit root tests that consider multiple structural breaks as analysis of the unemployment time series. Our empirical findings are consistent with the hysteresis hypothesis of unemployment.

Suggested Citation

  • Saeid Eisazadeh & Mahbobeh Tabarsi, 2013. "Does Unemployment Hysteresis Exist in Economy of Iran?," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 3(8), pages 1717-1724, August.
  • Handle: RePEc:asi:ijoass:2013:p:1717-1724
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    References listed on IDEAS

    as
    1. Gottfries, Nils & Horn, Henrik, 1987. "Wage Formation and the Persistence of Unemployment," Economic Journal, Royal Economic Society, vol. 97(388), pages 877-884, December.
    2. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters,in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
    3. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    4. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    5. Hargreaves Heap, S P, 1980. "Choosing the Wrong 'Natural' Rate: Accelerating Inflation or Decelerating Employment and Growth?," Economic Journal, Royal Economic Society, vol. 90(359), pages 611-620, September.
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