Working Paper: CEPR ID: DP858
Authors: Marika Karanassou; Dennis J. Snower
Abstract: This paper attempts to explain disparities among the unemployment experiences of different OECD countries in terms of the `fragility' of the short-run unemployment equilibrium (the impact of labour market shocks on the short-run unemployment rate) and the lag structure of the employment determination, wage setting, and labour force participation decisions. The effects of this lag structure on unemployment dynamics are captured through two general measures of `unemployment persistence' (occurring when temporary shocks have prolonged effects on unemployment) and `imperfect unemployment responsiveness' (occurring when permanent shocks have a delayed effect on unemployment).
Keywords: unemployment; labour market dynamics; employment; wage determination; labour force participation
JEL Codes: E32; J31; J32; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| temporary labor demand shocks (J23) | unemployment persistence (J64) |
| temporary decrease in labor demand (J23) | elevated unemployment levels (J64) |
| current employment (J68) | current unemployment rates (J64) |
| permanent labor demand shocks (J23) | imperfect responsiveness (D52) |
| fragility of unemployment equilibrium (J64) | impact of current labor demand shocks on future employment and unemployment (J23) |