Some Evidence on the Relevance of the Chain-reaction Theory in Selected Countries
In this paper we challenge the traditional labour market view, which argues that unemployment is determined in the long-term by its equilibrium rate, which in turn is affected by permanent shocks of some exogenous variables. In our empirical approach we decompose the dynamics of employment and labour force into transitory and permanent components. We estimated a small labour market model using VAR techniques. By simulating the model we are able to quantify the relative importance of the permanent and transitory components for the movements of the unemployment rate in four countries (Austria, France, UK, and USA). We find that the transitory component has a significant impact on unemployment only in the US. In contrast to that the permanent component appear to influence unemployment significantly in all included countries. In combination with the observation that labour market dynamics differ between countries, this may have powerful policy implications.
|Date of creation:||May 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Josefstädterstr. 39, A-1080 Vienna, Austria|
Phone: ++43 - (0)1 - 599 91 - 0
Fax: ++43 - (0)1 - 599 91 - 555
Web page: http://www.ihs.ac.at
More information through EDIRC
|Order Information:|| Postal: Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Karanassou, Marika & Sala, Hector & Snower, Dennis, 2003.
"Unemployment in the European Union: a dynamic reappraisal,"
Elsevier, vol. 20(2), pages 237-273, March.
- Karanassou, Marika & Sala, Héctor & Snower, Dennis J., 2003. "Unemployment in the European Union: A dynamic reappraisal," Open Access Publications from Kiel Institute for the World Economy 2933, Kiel Institute for the World Economy (IfW).
- Marika Karanassou & Hector Sala & Dennis J. Snower, 2002. "Unemployment in the European Union: A Dynamic Reappraisal," Working Papers 480, Queen Mary University of London, School of Economics and Finance.
- Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2002. "Unemployment in the European Union: A Dynamic Reappraisal," IZA Discussion Papers 531, Institute for the Study of Labor (IZA).
- Karanassou, Marika & Snower, Dennis J., 1997.
"Is the natural rate a reference point?,"
European Economic Review,
Elsevier, vol. 41(3-5), pages 559-569, April.
- Karanassou, Marika & Snower, Dennis J., 1996. "Is the Natural Rate a Reference Point?," CEPR Discussion Papers 1507, C.E.P.R. Discussion Papers.
- Marika Karanassou & Dennis Snower, 1996. "Is the Natural Rate a Reference Point?," Archive Discussion Papers 9623, Birkbeck, Department of Economics, Mathematics & Statistics.
- repec:crs:wpaper:9645 is not listed on IDEAS
- Pesaran, M Hashem, 1997.
"The Role of Economic Theory in Modelling the Long Run,"
Royal Economic Society, vol. 107(440), pages 178-91, January.
- Pesaran, M.H., 1996. "The Role of Economic Theory in Modelling the Long Run," Cambridge Working Papers in Economics 9612, Faculty of Economics, University of Cambridge.
- Olivier J. Blanchard & Lawrence H. Summers, 1986.
"Hysteresis and the European Unemployment Problem,"
NBER Working Papers
1950, National Bureau of Economic Research, Inc.
- Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
- Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
- Henry, Brian & Karanassou, Marika & Snower, Dennis J, 2000.
"Adjustment Dynamics and the Natural Rate: An Account of UK Unemployment,"
Oxford Economic Papers,
Oxford University Press, vol. 52(1), pages 178-203, January.
- Snower, Dennis J. & Karanassou, Marika & Henry, Brian, 1999. "Adjustment Dynamics and the Natural Rate: An Account of UK Unemployment," IZA Discussion Papers 75, Institute for the Study of Labor (IZA).
When requesting a correction, please mention this item's handle: RePEc:ihs:ihsesp:207. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doris Szoncsitz)
If references are entirely missing, you can add them using this form.