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Unemployment rate and the real wage behaviour: a neoclassical hint for the Colombian labour market adjustment

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Abstract

The Colombian urban unemployment rate has grown dramatically over the last six years. At the same time the real wage also had a sharp increase. The empirical evidence supports the hypothesis that an exogenous increase in the real wage was a cause of the unemployment growth. The long-run elasticity suggests a 1% increase of the real wage index increases unemployment rate something between 0.7% and 1.0%. Therefore it seems necessary that the real wage goes back to its equilibrium path for the reduction of the unemployment rate to the natural level.

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  • Luis Arango & Carlos Posada, 2002. "Unemployment rate and the real wage behaviour: a neoclassical hint for the Colombian labour market adjustment," Applied Economics Letters, Taylor & Francis Journals, vol. 9(7), pages 425-428.
  • Handle: RePEc:taf:apeclt:v:9:y:2002:i:7:p:425-428
    DOI: 10.1080/13504850110096142
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    References listed on IDEAS

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    1. Bardsen, G., 1990. "Dynamic Modelling And The Demand For Narrow Money In Norway," The Warwick Economics Research Paper Series (TWERPS) 359, University of Warwick, Department of Economics.
    2. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    4. Luis Eduardo Arango & Carlos Esteban Posada, 2001. "El Desempleo en Colombia," Borradores de Economia 176, Banco de la Republica de Colombia.
    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. Bardsen, Gunnar, 1992. "Dynamic modeling of the demand for narrow money in Norway," Journal of Policy Modeling, Elsevier, vol. 14(3), pages 363-393, June.
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    Cited by:

    1. Jesús Otero & Luis Fernando Gamboa & Andrés García-Suaza, 2011. "An analysis of the relationship between wages in the public and private sector in colombia: a panel data approach," DOCUMENTOS DE TRABAJO 008738, UNIVERSIDAD DEL ROSARIO.
    2. 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.
    3. Ana Maria Iregui & Jesus Otero, 2003. "On the dynamics of unemployment in a developing economy: Colombia," Applied Economics Letters, Taylor & Francis Journals, vol. 10(14), pages 895-898.
    4. Miguel Urrutia & Mauricio Ruiz, 2010. "Ciento setenta años de salarios reales en Colombia," Revista Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 28(63), pages 154-189, Diciembre.
    5. James Alm & Hugo López Castaño, 2002. "Payroll taxes in Colombia," INFORMES DE INVESTIGACIÓN 003316, FEDESARROLLO.
    6. Ricardo Bonilla González & Jorge Iván González, 2006. "Bien-estar y macroeconomía 2002-2006: el crecimiento inequitativo no es sostenible," PUBLICACIONES - CID 002064, UN - RCE - CID.
    7. Cecilia Albert Verdú & Carlos Giovanni González Espitia & Jhon James Mora Rodríguez, 2013. "Determinantes de la demanda de educación universitaria en Colombia, 1980-2010," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 15(29), pages 169-194, July-Dece.
    8. Rodrigo Taborda & Juan Carlos Guataqui, 2003. "Firm level evidence of efficiency wages and labor turnover in Colombia's manufacturing industry," BORRADORES DE INVESTIGACIÓN 002729, UNIVERSIDAD DEL ROSARIO.

    More about this item

    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

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