Common Trends and Hysteresis in Unemployment
1994 (English)Report (Other academic)
We examine the sources of labor market fluctuations in the Scandinavian countries using VAR models with common trends. Our primary concerns are the sources of hysteresis in unemployment and possible differences between the economies. A simple economic model is presented to motivate our identifying assumptions. We show how estimates of the theoretical parameters may be obtained from the estimated common trends coefficients. The empirical results suggest that (i) the only common source of hysteresis in the Scandinavian labor markets is shocks to wage setting (or, equivalently, equilibrium unemployment); (ii) transitory labor demand shocks, which are emphasized in the theoretical literature on hysteresis, do not seem to be empirically important.
Place, publisher, year, edition, pages
Stockholm: IIES , 1994. , 46 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 585
common trends, hysteresis, identification, structural parameters, supply and demand shocks, unemployment
IdentifiersURN: urn:nbn:se:su:diva-41910OAI: oai:DiVA.org:su-41910DiVA: diva2:342926