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A Reduced-form Equation for the Unemployment Rate Estimated from a Panel of Nineteen OECD Countries

Listed author(s):
  • Dimitris Hatzinikolaou

    (University of Ioannina, Greece)

  • Konstantina Girtzimani

    (University of Ioannina, Greece)

  • Christos Mousafiris

    (University of Ioannina, Greece)

Using a dynamic fixed-effects model for a panel of nineteen OECD countries and annual aggregate data, 1970-2008, we estimate a reduced-form equation for the observed unemployment rate. We find that wage-push factors, such as employment protection and union power, increase the unemployment rate, whereas net immigration reduces it, although this last effect is practically negligible. We also find that the labour market is characterised by strong “lagged adjustment processes,” so the governments of the countries in the sample have an additional incentive to fight current unemployment, to prevent it from becoming prolonged.

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File URL: http://www.esr.ie/article/download/399/115/399-1065-1-PB.pdf
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Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 46 (2015)
Issue (Month): 3 ()
Pages: 389-397

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Handle: RePEc:eso:journl:v:46:y:2015:i:3:p:389-397
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  1. Marika Karanassou & Hector Sala & Pablo F. Salvador, 2008. "Capital accumulation and unemployment: new insights on the Nordic experience," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 977-1001, November.
  2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
  3. Olivier Blanchard, 2006. "European unemployment: the evolution of facts and ideas," Economic Policy, CEPR;CES;MSH, vol. 21(45), pages 5-59, 01.
  4. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  5. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  6. Dimitris Hatzinikolaou & Pantelis Kammas, 2010. "Firing Restrictions, Government Growth, Immigration, and the NAIRU: Evidence from Fifteen OECD Countries," LABOUR, CEIS, vol. 24(4), pages 441-455, December.
  7. World Bank, 2009. "World Development Indicators 2009," World Bank Publications, The World Bank, number 4367, October.
  8. James Tobin, 1980. "Stabilization Policy Ten Years After," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(1, Tenth ), pages 19-90.
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