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Determinants of structural unemployment in Colombia. A search approach

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Abstract

This paper is aimed to identify the main determinants of the structural unemployment rate (SUR) in Colombia. To this end, we initially look up theoretical determinants of structural unemployment as defined by a basic search and matching model. Then, we estimate different measures of the SUR including the one that emerges from the search-theoretic. Next, we test empirically each of the determinants in the Colombian case. We find that the main explanations of structural unemployment rate (SUR) in Colombia 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 male, workers between 46 and 56 years old, and workers with no college education in the labour force. Finally, we use these variables to estimate the structural unemployment rate. Given the time series properties of the variables we applied a cointegrating approach with the Fully Modified Ordinary Least Squares (FMOLS) method which allows us to take into account the endogeneity of the vacancy rate. Classification JEL: E24, J3, J4

Suggested Citation

  • Luis E. Arango & Luz A. Flórez, 2016. "Determinants of structural unemployment in Colombia. A search approach," Borradores de Economia 969, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:969
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    Cited by:

    1. 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.

    More about this item

    Keywords

    search model; structural unemployment rate; vacancy rate; hiring cost indicator;

    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
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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