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Does Hysteresis in Unemployment Occur in OECD Countries? Evidence from Parametric and Non-Parametric Panel Unit Roots Tests

Author

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  • Liew, Venus Khim-Sen
  • Chia, Ricky Chee-Jiun
  • Puah, Chin-Hong

Abstract

This study tests the hysteresis hypothesis of unemployment in fourteen OECD countries by examining the stationarity of unemployment rates using several panel unit root tests. Empirical results show that the hysteresis hypothesis cannot be rejected for majority of the OECD when the tests are conducted on the basis of individual countries. However, rejection is obtained when cross-country interdependence in unemployment rates is incorporated in the estimation. Therefore, it is crucial to consider the cross-country labor markets interdependence when testing the hysteresis hypothesis as the labor market institutions and the stabilization policy of the labor markets in these OECD countries can play an important role in maintaining the unemployment to sustainable levels.

Suggested Citation

  • Liew, Venus Khim-Sen & Chia, Ricky Chee-Jiun & Puah, Chin-Hong, 2009. "Does Hysteresis in Unemployment Occur in OECD Countries? Evidence from Parametric and Non-Parametric Panel Unit Roots Tests," MPRA Paper 9915, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:9915
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    File URL: https://mpra.ub.uni-muenchen.de/9915/1/MPRA_paper_9915.pdf
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    References listed on IDEAS

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    Cited by:

    1. Gordana Marjanovic & Ljiljana Maksimovic & Nenad Stanisic, 2015. "Hysteresis and the NAIRU: The Case of Countries in Transition," Prague Economic Papers, University of Economics, Prague, vol. 2015(5), pages 503-515.
    2. repec:prg:jnlpep:v:preprint:id:526:p:1-13 is not listed on IDEAS
    3. repec:oup:cesifo:v:63:y:2017:i:3:p:295-316. is not listed on IDEAS
    4. Ifedolapo Olabisi Olanipekun & Seyi Saint Akadiri & Osundina Olawumi & Festus Victor Bekun, 2017. "Does Labor Market Hysteresis Hold in Low Income Countries?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 19-23.
    5. repec:prg:jnlpep:v:2015:y:2015:i:5:id:526:p:1-13 is not listed on IDEAS

    More about this item

    Keywords

    Unemployment; Hysteresis Hypothesis; Panel Unit Root Test; Parametric Test; Non-Parametric Test; OECD;

    JEL classification:

    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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