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Unemployment Rate And The Real Wage Behavior: A Neoclassical Hint For The Colombian Labor Market Adjustment

  • Luis Eduardo Arango

    ()

  • Carlos Esteban Posada

    ()

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 suggests 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.

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File URL: http://www.banrep.gov.co/docum/ftp/borra180.pdf
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Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 003736.

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Length: 9
Date of creation: 30 Jun 2001
Date of revision:
Handle: RePEc:col:000094:003736
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  1. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  2. Luis Eduardo Arango & Carlos Esteban Posada, . "El Desempleo en Colombia," Borradores de Economia 176, Banco de la Republica de Colombia.
  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. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
  5. 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.
  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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