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Unemployment Rate and the Real Wage Behavoir: A Neoclassical Hint for the Colombian Labor Market Adjustment

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  • Luis Eduardo Arango

    ()

  • Carlos Esteban Posada

    ()

Abstract

The colombian urban unemployment rate grew 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 suggest that one percent increase of the real wage index increases unemployment rate something between 0.7 and 1.0 percent. Therefore it seems necessary that real wage comes back to its equilibrium path for the reduction of the unemployment rate to the natural level.

Suggested Citation

  • Luis Eduardo Arango & Carlos Esteban Posada, 2001. "Unemployment Rate and the Real Wage Behavoir: A Neoclassical Hint for the Colombian Labor Market Adjustment," Borradores de Economia 180, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:180
    DOI: 10.32468/be.180
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    References listed on IDEAS

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    1. Bardsen, Gunnar, 1990. "Dynamic Modelling And The Demand For Narrow Money In Norway," Economic Research Papers 268479, University of Warwick - Department of Economics.
    2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. 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.
    4. 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.
    5. Luis Eduardo Arango T. & Carlos Esteban Posada P., 2001. "El desempleo en Colombia," Coyuntura Social 012955, Fedesarrollo.
    6. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    7. 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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    Citations

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    Cited by:

    1. Miguel Urrutia & Mauricio Ruiz, 2010. "Ciento Setenta Años de Salarios Reales en Colombia," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 28(63), pages 154-189, December.
    2. James Alm & Hugo López Castaño, 2002. "Payroll taxes in Colombia," Informes de Investigación 003316, Fedesarrollo.
    3. Ricardo Bonilla González & Jorge Iván González, 2006. "Bien-estar y macroeconomía 2002-2006: el crecimiento inequitativo no es sostenible," Publicaciones - CID 002064, Universidad Nacional de Colombia -FCE - CID.
    4. 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.
    5. Luis Eduardo Arango & Carlos Esteban Posada, 2006. "La Tasa de Desempleo de Largo Plazo en Colombia," Borradores de Economia 388, Banco de la Republica de Colombia.
    6. 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.
    7. Miguel Urrutia & Mauricio Ruiz, 2010. "Ciento Setenta Años de Salarios Reales en Colombia," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República - ESPE, vol. 28(63), pages 154-189, December.
    8. 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.
    9. 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.
    10. 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.

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    More about this item

    Keywords

    Unemployment rate; real wage; cointegration; long-run elasticities.;
    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

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