IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v58y2020i5d10.1007_s00181-018-1572-y.html
   My bibliography  Save this article

Determinants of structural unemployment in Colombia: a search approach

Author

Listed:
  • Luis E. Arango

    (Banco de la República (Central Bank of Colombia))

  • Luz A. Flórez

    (Banco de la República (Central Bank of Colombia))

Abstract

We provide evidence of the structural unemployment rate determinants in Colombia between 1984 and 2015. In the first stage, we estimate different measures of this variable including the ones that emerge from the search-theoretic, the Phillips curve and a structural vector autoregressive model. Next, by using a fully modified ordinary least squares cointegration approach, we test the determinants in the Colombian case following the search model guidelines. Accordingly, the main explanations of the structural unemployment rate are the real minimum wage, the real interest rate, a hiring cost indicator, sectoral shifts, non-wage labour costs and some demographic factors such as the proportion of workers with no college education. Finally, we use these variables to estimate a new measure of the structural unemployment rate called the true structural unemployment rate.

Suggested Citation

  • Luis E. Arango & Luz A. Flórez, 2020. "Determinants of structural unemployment in Colombia: a search approach," Empirical Economics, Springer, vol. 58(5), pages 2431-2464, May.
  • Handle: RePEc:spr:empeco:v:58:y:2020:i:5:d:10.1007_s00181-018-1572-y
    DOI: 10.1007/s00181-018-1572-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-018-1572-y
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s00181-018-1572-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    2. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    3. Laurence Ball & Nicolás Roux & Marc Hofstetter, 2013. "Unemployment in Latin America and the Caribbean," Open Economies Review, Springer, vol. 24(3), pages 397-424, July.
    4. Orazio Attanasio & Arlen Guarín & Carlos Medina & Costas Meghir, 2015. "Long Term Impacts of Vouchers for Vocational Training: Experimental Evidence for Colombia," Borradores de Economia 13326, Banco de la Republica.
    5. Balmaseda, Manuel & Dolado, Juan J & Lopez-Salido, J David, 2000. "The Dynamic Effects of Shocks to Labour Markets: Evidence from OECD Countries," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 3-23, January.
    6. Robert J. Gordon, 1998. "Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 297-346.
    7. David Brauer, 2007. "The Natural Rate of Unemployment: Working Paper 2007-06," Working Papers 18566, Congressional Budget Office.
    8. Arango-Thomas, Luis Eduardo & Castellani, Francesca & Lora-Torres, Eduardo (ed.), 2016. "Desempleo femenino en Colombia," Books, Banco de la Republica de Colombia, number 2016a-12.
    9. Andrés Álvarez & Marc Hofstetter, 2014. "Job vacancies in Colombia: 1976–2012," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-11, December.
    10. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    11. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
    12. Juan Manuel Julio, 2001. "How Uncertain are NAIRU Estimates in Colombia?," Borradores de Economia 2798, Banco de la Republica.
    13. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 99-125.
    14. Camilo Alberto Cárdenas Hurtado & María Alejandra Hernández Montes & Jhon Edwar Torres Gorron, 2015. "A Statistical Analysis of Heterogeneity on Labour Markets and Unemployment Rates in Colombia," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, August.
    15. Arango Luis Eduardo & Andrés Felipe Garcia & Carlos Esteban Posada, 2008. "La metodología de la Encuesta Continua de Hogares y el empalme de las series del mercado laboral urbano de Colombia," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, May.
    16. Phillips, Peter C B, 1995. "Fully Modified Least Squares and Vector Autoregression," Econometrica, Econometric Society, vol. 63(5), pages 1023-1078, September.
    17. Adriana Kugler & Maurice Kugler, 2009. "Labor Market Effects of Payroll Taxes in Developing Countries: Evidence from Colombia," Economic Development and Cultural Change, University of Chicago Press, vol. 57(2), pages 335-358, January.
    18. Jorge Andrés Tamayo, 2008. "La tasa natural de desempleo en Colombia y sus determinantes," Borradores de Economia 491, Banco de la Republica de Colombia.
    19. Echavarría-Soto, Juan José & López, Enrique & Ocampo, Sergio & Rodríguez-Niño, Norberto, 2012. "Choques, instituciones laborales y desempleo en Colombia," Chapters, in: Arango-Thomas, Luis Eduardo & Hamann-Salcedo, Franz Alonso (ed.), El mercado de trabajo en Colombia : hechos, tendencias e instituciones, chapter 18, pages 753-794, Banco de la Republica de Colombia.
    20. Barbara Petrongolo & Christopher A. Pissarides, 2008. "The Ins and Outs of European Unemployment," American Economic Review, American Economic Association, vol. 98(2), pages 256-262, May.
    21. Luis Eduardo Arango & IREGUI, Ana María & MELO, Luis F., 2006. "Recent macroeconomic performance in colombia: what went wrong?," Revista de Economía del Rosario, Universidad del Rosario, June.
    22. Giuseppe BERTOLA & Tito BOERI & Sandrine CAZES, 2000. "Employment protection in industrialized countries: The case for new indicators," International Labour Review, International Labour Organization, vol. 139(1), pages 57-72, March.
    23. Blanchard, Olivier Jean, 1991. "Wage Bargaining and Unemployment Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 277-292, August.
    24. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 115-136, Fall.
    25. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    26. Stuart E. Weiner, 1986. "The natural rate of unemployment: concepts and issues," Economic Review, Federal Reserve Bank of Kansas City, vol. 71(Jan), pages 11-24.
    27. Barnichon, Regis, 2010. "Building a composite Help-Wanted Index," Economics Letters, Elsevier, vol. 109(3), pages 175-178, December.
    28. Aysun, Uluc & Bouvet, Florence & Hofler, Richard, 2014. "An alternative measure of structural unemployment," Economic Modelling, Elsevier, vol. 38(C), pages 592-603.
    29. Nicolaas Groenewold & A J Hagger, 2000. "The Natural Rate of Unemployment in Australia: Estimates From a Structural Var," Australian Economic Papers, Wiley Blackwell, vol. 39(2), pages 121-137, June.
    30. George L. Perry, 1970. "Changing Labor Markets and Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(3), pages 411-448.
    31. Franco Modigliani & Lucas Papademos, 1975. "Targets for Monetary Policy in the Coming Year," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1), pages 141-166.
    32. King, Thomas B. & Morley, James, 2007. "In search of the natural rate of unemployment," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 550-564, March.
    33. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-618, Nov.-Dec..
    34. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
    35. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-193, January.
    36. Groenewold, Nicolaas & Hagger, A J, 2000. "The Natural Rate of Unemployment in Australia: Estimates from a Structural VAR," Australian Economic Papers, Wiley Blackwell, vol. 39(2), pages 121-137, June.
    37. Murat Tasci & Saeed Zaman, 2010. "Unemployment after the recession: a new natural rate?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Sep.
    38. Stuart E. Weiner, 1993. "New estimates of the natural rate of unemployment," Economic Review, Federal Reserve Bank of Kansas City, vol. 78(Q IV), pages 53-69.
    39. Nicolaas Groenewold & A. J. Hagger, 2003. "Natural-rate Estimates for the Australian States: An SVAR Approach," Regional Studies, Taylor & Francis Journals, vol. 37(3), pages 251-263.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Deicy J. Cristiano-Botia & Manuel Dario Hernandez-Bejarano & Mario A. Ramos-Veloza, 2021. "Labor Market Indicator for Colombia (LMI)," Borradores de Economia 1152, Banco de la Republica de Colombia.
    2. Luis E. Arango & Luz A. Flórez & María A. Olarte-Delgado, 2019. "Precio del carbón y dinámica laboral en Valledupar," Revista de Economía del Rosario, Universidad del Rosario, vol. 22(2), pages 313-370, December.
    3. J. Sebastián Amador-Torres, 2018. "New Keynesian NAIRU and the Okun Law: An application for Colombia," Borradores de Economia 1034, Banco de la Republica de Colombia.
    4. Luz A. Flórez & Karen L. Pulido-Mahecha & Mario A. Ramos-Veloza, 2018. "Okun´s law in Colombia: a non-linear cointegration," Borradores de Economia 1039, Banco de la Republica de Colombia.
    5. Luis E. Arango & Luz A. Flórez, 2017. "Informalidad laboral y elementos para un salario mínimo diferencial por regiones en Colombia," Borradores de Economia 1023, Banco de la Republica de Colombia.
    6. Leonardo Fabio Morales & Carlos Ospino & Nicole Amaral, 2021. "Online Vacancies and its Role in Labor Market Performance," Borradores de Economia 1174, Banco de la Republica de Colombia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Echavarría-Soto, Juan José & López, Enrique & Ocampo, Sergio & Rodríguez-Niño, Norberto, 2012. "Choques, instituciones laborales y desempleo en Colombia," Chapters, in: Arango-Thomas, Luis Eduardo & Hamann-Salcedo, Franz Alonso (ed.), El mercado de trabajo en Colombia : hechos, tendencias e instituciones, chapter 18, pages 753-794, Banco de la Republica de Colombia.
    2. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa : eine Bestandsaufnahme (Structural unemployment in Europe * an inventory)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 411-427.
    3. Andrés Álvarez, 2016. "La Curva de Beveridge en Colombia (1976-2014): Cambios cíclicos y estructurales," Borradores de Economia 962, Banco de la Republica de Colombia.
    4. Richard K. Crump & Stefano Eusepi & Marc Giannoni & Aysegul Sahin, 2019. "A Unified Approach to Measuring u," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 143-238.
    5. Hairault, Jean-Olivier & Zhutova, Anastasia, 2018. "The cyclicality of labor-market flows: A multiple-shock approach," European Economic Review, Elsevier, vol. 103(C), pages 150-172.
    6. Andrea Vaona, 2015. "Anomalous empirical evidence on money long-run super-neutrality and the vertical long-run Phillips curve," Working Papers 17/2015, University of Verona, Department of Economics.
    7. King, Thomas B. & Morley, James, 2007. "In search of the natural rate of unemployment," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 550-564, March.
    8. Deicy J. Cristiano-Botia & Manuel Dario Hernandez-Bejarano & Mario A. Ramos-Veloza, 2021. "Labor Market Indicator for Colombia (LMI)," Borradores de Economia 1152, Banco de la Republica de Colombia.
    9. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa : eine Bestandsaufnahme (Structural unemployment in Europe * an inventory)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 411-427.
    10. Jorge E. Restrepo L., 2008. "Estimating the NAIRU for Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(2), pages 31-46, August.
    11. Luis Eduardo Arango & Carlos Esteban Posada, 2006. "The Time-Varying Long-Run Unemployment Rate: The Colombian Case," Borradores de Economia 389, Banco de la Republica de Colombia.
    12. Bozani, Vasiliki & Drydakis, Nick, 2011. "Studying the NAIRU and its Implications," IZA Discussion Papers 6079, Institute of Labor Economics (IZA).
    13. Luis Eduardo Arango & Carlos Esteban Posada, 2007. "Inflación y desempleo en Colombia: NAIRU y tasa de desempleo compatible con alcanzar la meta de inflación (1984-2005)," Borradores de Economia 4021, Banco de la Republica.
    14. Marc-André Gosselin & René Lalonde, 2002. "Une approche éclectique d'estimation du PIB potentiel américain," Staff Working Papers 02-36, Bank of Canada.
    15. Marika Karanassou & Hector Sala, 2010. "Labour Market Dynamics in Australia: What Drives Unemployment?," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 185-209, June.
    16. Miyamoto, Hiroaki & Takahashi, Yuya, 2011. "Productivity growth, on-the-job search, and unemployment," Journal of Monetary Economics, Elsevier, vol. 58(6), pages 666-680.
    17. Tara M. Sinclair, 2009. "The Relationships between Permanent and Transitory Movements in U.S. Output and the Unemployment Rate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2‐3), pages 529-542, March.
    18. Troncoso-Valverde, Cristián, 2004. "Preference Shifts, Structural Breaks and the Domestic Demand for Chilean Wine," Brazilian Journal of Rural Economy and Sociology (Revista de Economia e Sociologia Rural-RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 42(3), pages 1-20, September.

    More about this item

    Keywords

    Search model; Structural unemployment rate; Vacancy rate; Hiring cost indicator;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:58:y:2020:i:5:d:10.1007_s00181-018-1572-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.