Working Paper: CEPR ID: DP1082
Authors: Marco Bianchi; Gylfi Zoega
Abstract: This paper is an empirical investigation of unemployment rate series in 17 countries. The timing and size of shifts in the mean rate of unemployment are estimated. The size of the shifts and the remaining persistence in the unemployment rate series are then related to institutional differences between the countries. The observed persistence in the unemployment hysteresis arises following large shocks to unemployment, but not following small changes. These results pose a challenge to theorists since none of the existing models of hysteresis have this property.
Keywords: World Unemployment; Macroeconomic Policy; Equilibrium Unemployment; Hysteresis; Shifting Mean Value Model
JEL Codes: C22; L24; L32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large shocks (E32) | significant persistence in unemployment (J64) |
| small shocks (E32) | no significant persistence in unemployment (J64) |
| shock size (F35) | unemployment persistence (J64) |
| unemployment benefit replacement ratio (J68) | unemployment persistence (J64) |
| duration of unemployment benefits (J65) | unemployment persistence (J64) |
| shifts in mean unemployment rates (J64) | unemployment persistence (J64) |