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Do Labor Reforms in Spain have an Effect on the Equilibrium Unemployment Rate?

Listed author(s):
  • Dionisio Ramirez
  • Gabriel Rodríguez

    (Departamento de Economía - Pontificia Universidad Católica del Perú)

In this paper, we analyze the impact of several labor reforms in Spain on its equilibrium unemployment rate. To this end, we analyzed the behavior of the observed unemployment rate in Spain during the 1976-2012 period, thereby assessing whether that rate is better characterized as a hysteresis process or, on the contrary, as a stationary process with fluctuations around an equilibrium unemployment rate (NAIRU). In order to achieve this aim, we employed unit root contrasts with structural change. Similarly, in order to calculate the equilibrium unemployment rate, we applied the methodology of multiple structural changes proposed by Bai and Perron (1998, 2003a). This method allows the estimation of breaking dates and the values of unemployment rates for each of the selected regimes. Lastly, we compare the direction in the changes of the equilibrium unemployment rate, as well as the dates of those breaking points, with the dates in which different labor reforms were enacted in Spain. This will allow us to determine whether those reforms had any effect on the Spanish labor market. The obtained results suggest that only the reforms of 1980, 1997 and 2006 had some influence on the equilibrium unemployment rate level in combination with changes in inflation and sectorial employment structure.

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Paper provided by Departamento de Economía - Pontificia Universidad Católica del Perú in its series Documentos de Trabajo / Working Papers with number 2013-367.

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Length: pages
Date of creation: 2013
Publication status: published
Handle: RePEc:pcp:pucwps:wp00367
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Av. Universitaria 1801, San Miguel, Lima, Perú

Phone: (511) 626-2000 ext. 4950, 4951
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Web page: http://departamento.pucp.edu.pe/economia/
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  22. Gómez García, F. & Rebollo Sanz, Y. & Usabiaga Ibáñez, C., 2002. "Nuevas estimaciones de la NAIRU de la economía española: métodos directos," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 20, pages 509-530, Diciembre.
  23. PERRON, Pierre & RODRIGUEZ, Gabriel, 1998. "GLS Detrending, Efficient Unit Root Tests and Structural Change," Cahiers de recherche 9809, Universite de Montreal, Departement de sciences economiques.
  24. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
  25. Bellod Redondo, José Francisco, 1999. "Prueba de causalidad y determinación de la NAIRU," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(264), pages 663-692, octubre-d.
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