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Insider Power as a Source of Hysteresis in Unemployment: Tests with Australian Data

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  • NICOLAAS GROENEWOLD
  • LEANNE TAYLOR

Abstract

This paper reports the results of an empirical investigation of hysteresis in the unemployment rate using Australian data for 1966(3)‐1988(4). It is found that there is not hysteresis in the strict sense of the irrelevance of the natural unemployment rate although there is strong evidence of insider power in the wage‐fixing process. There is no evidence that the Accord changed the extent of the influence of insider power on wage setting.

Suggested Citation

  • Nicolaas Groenewold & Leanne Taylor, 1992. "Insider Power as a Source of Hysteresis in Unemployment: Tests with Australian Data," The Economic Record, The Economic Society of Australia, vol. 68(1), pages 57-64, March.
    • Handle: RePEc:bla:ecorec:v:68:y:1992:i:1:p:57-64
    DOI: 10.1111/j.1475-4932.1992.tb01749.x
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    References listed on IDEAS

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    1. Mitchell, William F, 1987. "The Nairu, Structural Imbalance and the Macroequilibrium Unemployment Rate," Australian Economic Papers, Wiley Blackwell, vol. 26(48), pages 101-118, June.
    2. Chapman BJ. & Gruen F., 1990. "Analysis of the Australian consensual incomes policy: the prices and incomes accord," ILO Working Papers 992754563402676, International Labour Organization.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. Mark Wooden, 1990. "Corporatism And Wage Setting: The Accord In Hindsight," Economic Papers, The Economic Society of Australia, vol. 9(2), pages 51-63, June.
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    6. 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.
    7. repec:bla:ecorec:v:61:y:1985:i:173:p:516-21 is not listed on IDEAS
    8. Alogoskoufis, George & Manning, Alan, 1988. "Wage setting and unemployment persistence in Europe, Japan and the USA," European Economic Review, Elsevier, vol. 32(2-3), pages 698-706, March.
    9. Lindbeck, Assar & Snower, Dennis J, 1988. "Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach," American Economic Review, American Economic Association, vol. 78(1), pages 167-188, March.
    10. Watts, M.J. & Mitchell, W.F., 1988. "Australian Wage Inflation: Real Wage Resistance, Hysteresis And Income Policy: 1968-1987," Papers 88-03, Flinders of South Australia - Discipline of Economics.
    11. Peter Dawkins & Mark Wooden, 1985. "Labour Utilization and Wage Inflation in Australia: An Empirical Examination," The Economic Record, The Economic Society of Australia, vol. 61(2), pages 516-521, June.
    12. Chapman, B.J. & Gruen, F., 1990. "An Analysis Of The Australian Consensual Incomes Policy: The Prices And Incomes Accord," CEPR Discussion Papers 221, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    13. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    14. Watts, Martin J & Mitchell, William F, 1990. "Australian Wage Inflation: Real Wage Resistance, Hysteresis and Incomes Policy: 1968(3)-1988(3)," The Manchester School of Economic & Social Studies, University of Manchester, vol. 58(2), pages 142-164, June.
    15. Lindbeck, Assar & Snower, Dennis J., 1987. "Union activity, unemployment persistence and wage-employment ratchets," European Economic Review, Elsevier, vol. 31(1-2), pages 157-167.
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    Cited by:

    1. Elizabeth Webster, 1999. "Macroeconomic Evaluations of Labour Market Programs," The Economic and Labour Relations Review, , vol. 10(1), pages 107-125, June.
    2. 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.
    3. Tolga Omay & Muhammad Shahbaz & Chris Stewart, 2021. "Is there really hysteresis in the OECD unemployment rates? New evidence using a Fourier panel unit root test," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(4), pages 875-901, November.
    4. Omay, Tolga & Shahbaz, Muhammad & Stewart, Chris, 2021. "Is There Really Hysteresis in OECD Countries’ Unemployment Rates? New Evidence Using a Fourier Panel Unit Root Test," MPRA Paper 107691, University Library of Munich, Germany, revised 10 May 2021.
    5. Zarina Oflaz, 2017. "Structural Break, Nonlinearity and the Hysteresis hypothesis: Evidence from new unit root tests," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 4(2), pages 1-16.
    6. T. D. Stanley, 2004. "Does unemployment hysteresis falsify the natural rate hypothesis? a meta‐regression analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 18(4), pages 589-612, September.

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