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Panel Data Evidence on the Role of Institutions and Shocks for Unemployment Dynamics and Equilibrium

Author

Listed:
  • Nymoen, Ragnar

    (Dept. of Economics, University of Oslo)

  • Sparrman, Victoria

    (Statistics Norway)

Abstract

We estimate the quantitative importance of labour market institutions for equilibrium unemployment in OECD. The empirical equation for unemployment is based on the solution of a dynamic macroeconomic model where wages and prices are jointly determined with unemployment. Compared to existing studies, the theoretical model implies a higher order dynamics in the nal equation for unemployment and the sample has more variation in unemployment and in institutions. Finally, we incorporate objectively and automatically selected indicators for structural breaks. We find that institutional variables have statistical signi cance, but that these variables account for relatively little of the overall change in the OECD average unemployment rate. The shocks to the economy have been more important for the evolution in the actual average unemployment rate.

Suggested Citation

  • Nymoen, Ragnar & Sparrman, Victoria, 2012. "Panel Data Evidence on the Role of Institutions and Shocks for Unemployment Dynamics and Equilibrium," Memorandum 20/2012, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2012_020
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    References listed on IDEAS

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    Cited by:

    1. Haraldsen, Kristine Wika & Ragnar, Nymoen & Sparrman, Victoria, 2019. "Labour market institutions, shocks and the employment rate," Memorandum 6/2019, Oslo University, Department of Economics.
    2. Kristine Wika Haraldsen & Ragnar Nymoen & Victoria Sparrman, 2019. "Labour market institutions, shocks and the employment rate," Discussion Papers 901, Statistics Norway, Research Department.

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    More about this item

    Keywords

    OECD area unemployment; dynamics; structural breaks; equilibrium unemployment; wage setting; NAIRU; labour market institutions; automatic variable selection;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • 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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