A sectoral approach to Okun’s Law

The study adds to the existing literature on the relationship between output and unemployment by using a sectoral specification of Okun’s Law to capture the differential sensitivity of the unemployment rate to output developments in the services and manufacturing sectors. Using quarterly data for the period between 2000 and 2012, we show that Malta’s unemployment rate has been more sensitive to output developments in the services sector than to those in the manufacturing sector. We use different equation specifications and the youth unemployment rate to show that the impact resulting from developments in the manufacturing sector occurs mainly via lay-offs while developments in the services sector affect the unemployment rate via the hiring of new entrants into the labour market.     

The asian financial crisis and the natural rate of unemployment: Estimates from a structural var for the newly industrializing economies of asia

Abstract. We use a structural vector autoregressive model to estimate the natural rate of unemployment for Hong Kong, Korea, Singapore and Taiwan for the period 1982–2000. Our results show that the dramatic rise in the unemployment rate observed in Hong Kong and Korea was mainly the result of demand shocks rather than structural changes, while in Singapore the unemployment rate rise reflected almost entirely a rise in the natural rate. Taiwan's natural rate has been relatively stable. We offer explanations for these different results in terms of the different economic characteristics (particularly labor market features) of the four countries.     

Black–white wage differentials: duration and probability unemployment effects in a multiple of sample selection bias model

The extent to which probability and duration of unemployment affect the black–white wage differentials is examined in this paper. The paper simultaneously incorporates in the wage equation the multiple sample selection bias that occurs as a result of individuals’ propensity to be in the labor force, and the firm’s hiring decisions. The results reveal a substantial contribution of the duration of unemployment variable to the black–white wage differential, but a small portion of the differential is explained by the probability of unemployment. The results also indicate a sizeable difference between the contribution of the duration of unemployment variable to the male’s wage differentials (26%) and to the female’s (35%). The study finds that an individual’s labor force decision as well as a firm’s hiring decision are important in the wage determination process and that failure to account for the sample selectivity bias due to these two decisions will result in either underestimating or overestimating the wage differentials between black and white workers. At the macro level, the results seem to suggest that promotion of racial wage equality should be associated with policies that will minimize blacks’ incidence of unemployment and duration of unemployment spells.     

Liability dollarization,exchange market pressure and fear of floating: empirical evidence for Turkey

US and British unemployment rates for non–white males and females are compared over the period 1970–1998. Whereas US rates remained fairly steady, there was a marked increase in British non–white unemployment rates. The reasons for this poor performance, relative to the good performance of US non–whites are explored. It is shown that non–white unemployment behaves in different ways across the two countries. For example, British rates rise faster in a recession than white rates, whereas US rates appear not to follow this British hypercyclical pattern.     

A Picture of Male and Female Unemployment among Britain's Ethnic Minorities

Using a sample of around one million observations, formed by combining two micro datasets from the 1991 Census of Population, the paper explores male and female unemployment differences across Britain's ethnic minorities. The large sample size allows a detailed multivariate analysis of females for the first time. Unemployment differences are not simply the result of characteristic differences or discrimination by the white majority. The empirical work shows that there are equally wide discrepancies in female unemployment rates, compared with males, between the white majority and the non-white ethnic minorities. Of particular interest is the comparison between UK born and foreign born ethnic minorities. Unemployment rates among the former tend to be considerably higher, but this is accounted for by characteristic differences. Thus there is no evidence that the UK born are doing worse, as the raw data suggest, but they do not seem to be becoming better assimilated either.     

Okun’s law revisited: a threshold in regression quantiles approach

This article proposes, for the first time, a threshold in regression quantiles approach to the analysis of Okun’s law. By applying to US data over the 1948Q1–2016Q4 period, we have three major findings. First, a single threshold is detected for both multiple and individual quantiles cases. However, the effect of threshold nonlinearity is only present in the middle to upper quantiles of the conditional unemployment distribution in the individual quantiles case. Second, the first-order autoregressive coefficients of unemployment are significantly larger in the lower-growth regime, indicating that shocks to unemployment appear to be more persistent during recessions. Finally, the Okun’s coefficients are all negative across the recessionary and expansionary regimes, confirming the validity of Okun’s law. Moreover, the Okun’s coefficients are smaller (more negative) in the lower-growth regime, suggesting that the effect of differenced output on differenced unemployment is asymmetric, and is more pronounced in recessions.     

The time-frequency dependence of unemployment on real input prices: a wavelet coherency and partial coherency approach

ABSTRACT

While the dependence of unemployment on real oil price and real interest rate is an important issue that has been addressed only in the time dimension, little is known about the movements of real input prices and their impact on unemployment in the time-frequency space. With a continuous wavelet coherency and partial coherency approach and monthly data of Japan and US from January 1960 to May 2017, this paper contributes to the literature by examining the characteristics of the dependence of unemployment on real input prices across frequencies and over time. The empirical results indicate that: First, a rise in real oil price leads to productivity growth slowdown and unemployment increase at the scale of 16–64 months after 1990 for Japan and 8–24 months after 2005 for US. Second, an increase in real interest rate results in higher unemployment at the 16–32-month scale before 1974 for Japan and 8–64-month scale before 2000 for US. Third, the degree of integration between labour market and energy market in US is higher than that in Japan. This study provides time-frequency evidence to the supply side hypothesis about the relationships between input prices and unemployment.     

Unemployment and Welfare Participation in a Structural VAR: Rethinking the 1990s in the United States

A report by the Council of Economic Advisers (1997 Council of Economic Advisers. May 1997. “Explaining the decline in welfare receipt, 1993–1996”. May, Washington, DC Executive Office of the President [Google Scholar]) is the first of a group of studies, known as caseload studies, analysing the relationship between the US unemployment rate and the welfare participation rate, with special regard to the 1990s. We examine this relationship in a structural VAR model over the period of 1960–2000 and find that the unemployment rate does not help to predict the welfare participation rate while the converse is more likely to hold. These results are robust to state and year heterogeneity over a period of unprecedented positive correlation between unemployment and welfare participation, i.e. 1990–1998. Further, we find that a shock to the welfare participation rate has a contemporaneous impact on the unemployment rate while the converse is less likely to hold. The main conclusion is that several caseload studies may be based on the wrong assumption that the unemployment rate is an exogenous explanatory variable of the welfare participation rate.     

Estimation of income elasticities from cross-section data

Using Johnson's decomposition technique, this paper demonstrates that the disappearance of the gap between female and male unemployment rates in the United States during the last decade results partly from a general hiring policy that is favourable to women workers. This conclusion holds for workers in five out of eight occupational subsamples considered. The sign and size of unexplained female - male unemployment rate differential estimated from 1969, 1977 and 1987 CPS data suggest that hiring discrimination against females in the US labour market has declined considerably during the last two decades. The study also supports the earlier finding that the growth of employment in government and in the female dominated service sector, and migration of workers from the South to other regions contribute significantly to the convergence of male and female unemployment rates in the 1980s.     

Trade,capital accumulation and structural unemployment: an empirical study of the Singapore economy

This paper studies the factors responsible for the secular decline of Singapore's unemployment rate over the period 1966-2000 in an environment of low and stable inflation rates. We introduce wage bargaining and unions into a specific-factors, two-sector economy with an export sector and a non-tradable sector to obtain an endogenous natural unemployment rate. Increases in the relative export price and capital stock in the export sector are predicted to reduce structural unemployment. These hypotheses could not be rejected based on structural estimations and co-integration regressions. Empirically, capital accumulation in the export sector explains most of the decline in Singapore's unemployment rate.     

A prospective analysis of labour market status and self-rated health in the UK and Russia

Comparing prospective data from the UK and Russia, this paper analyzes whether the association of labour market status, and particularly unemployment, with subsequent health varies by the level of state protection provided to the unemployed. While the UK's unemployment welfare regime is classified as providing minimal protection, the Russian regime is sub-protective. Employing Cox duration analysis upon data from the Russian Longitudinal Monitoring Survey and the British Household Panel Survey for the period 2000–2007, this study finds that labour market status and economic circumstances independently predicted individual-level declines in self-rated health and, contrary to expectations, the associations of unemployment with health decline were similarly sized in the two countries.     

Unemployment Durations in West Germany Before and After the Reform of the Unemployment Compensation System during the 1980s

Abstract. This paper analyzes empirically the distribution of unemployment durations in West Germany during the 1980s and 1990s. It therefore covers periods before and after the changes during the mid‐1980s in the maximum entitlement periods for unemployment benefits for older unemployed. The analysis is based on the IAB employment subsample containing administrative data for about 500,000 individuals. Since these data only partly reveal the unemployment duration in an economic sense, we use a narrow and a wide proxy for unemployment. Our empirical analysis finds significant changes in the distribution of non‐employment durations for older unemployed. At the same time, the distribution of unemployment durations between jobs remained unchanged after the reforms. Our findings clearly show that many firms and workers used the more beneficial laws as a part of early retirement packages. Surprisingly, for those workers who found and accepted a new job, we do not observe a prolongation of their search periods to a sizeable extent.     

Labour market institutions and unemployment: an international panel data analysis

This paper deals with the effects of labour market institutions on unemployment in a panel of 19 OECD countries for the period 1960–2000. In contrast to many other studies, we use long time series and analyse cyclically adjusted trend values of the unemployment rate. Our novel contribution is the estimation of panel models where we allow for heterogeneous effects of institutions on unemployment. Our main results are, first, that on the average tighter employment protection, a higher tax burden on labour income and a more generous unemployment insurance system increase, whereas a higher centralization of wage negotiations decreases unemployment, and secondly, that the magnitude of the effects of institutions differs considerably between countries.     

The phillips curve and US macroeconomic performance during the 1990s

This paper identifies two competing accounts of recent US macroeconomic performance, both of which are capable of explaining the concurrence of low unemployment and low inflation experienced by the US after 1995. Econometric evidence provides partial support for both views, establishing that while there has been no change in the position of the long run Phillips curve in the US during the 1990s, this long run Phillips curve is likely not vertical. These results suggest that recent US macroeconomic performance is not sustainable and that US policy makers ultimately face a choice between higher unemployment or higher inflation in the long run.     

Reworking the Wage Curve: Exploring the consistency of the model across time,space and demographic group

This paper extends Blanchflower & Oswald's (1994) work on the wage curve to the 50 largest metropolitan areas in the United States. The wage curve is more elastic in US metropolitan areas than prior research shows for the nation as a whole, and the wage curve varies over the business cycle, becoming more elastic in periods of higher unemployment. The most striking finding is that black workers have a more elastic wage curve than do white workers. Estimating the wage curve with the non-employment rate, a measure of underemployment, shows elasticities that are substantially higher than for wage curves estimated with the unemployment rate. This trend further increases the negative effects on pay for blacks, who are more likely than white workers to be underemployed.     

The college-to-work transition during the 1990s: evidence from Sweden

This article analyses the time it takes for Swedish college graduates to start a full time job that lasts for 6 months or more. The focus is on the transition over time during the period 1991 to 1999. This period covers both upturns and downturns of the business cycle, providing a unique opportunity to consider the importance of the timing of graduation. The results show that the risk of unemployment and the unemployment duration have varied considerably with the business cycle, both within and between cohorts. For example, the field of education is of more importance for the outcomes during recessions. Further, the relative risk of unemployment has decreased over time for individuals with the highest degree of education whereas the unemployment duration has increased, indicating that the selection into unemployment for this group may have changed over time. This is interesting, not least in the light of the sharp expansion of the higher educational system during the study period.     

THE DRIVING FORCES BEHIND THE FALLING LABOUR SHARE AND PERSISTENT UNEMPLOYMENT IN JAPAN

Like in most advanced countries, the labour income share in Japan has been falling since the mid‐1970s. However, in contrast to other advanced economies, Japan experienced an exceptional recessive period in the 1990s and 2000s, with the rate of unemployment rising to a historical maximum of 5.5% in 2002, to persist above 4% in subsequent years. In the present paper, we examine the main causes behind the paths followed by the labour income share and the unemployment rate during the post‐1997 crisis period (1997–2002) and the transition years that followed (2002–2009). We do so by estimating a multi‐equation macro model that allows us to look separately at the various components of this particular labour market: wages, output, and employment. Our main finding is that the fall in the labour share can be attributed to the changes that took place within the labour relations system (the weakening of unions mainly) and that the surge in unemployment can be altogether ascribed to the distorting effects of the sizeable and increasing public debt.     

The Gift Paradox: Complex Selves and Symbolic Good

Generous unemployment benefits are a conventional explanation of the high rates of unemployment in many OECD countries. However, this perception has been challenged on the basis that cross-national evidence comes only from regression analyses of unemployment on the OECD's gross replacement rate but that results are not robust to improved, multidimensional measures of generosity. In this article, I conduct a detailed empirical analysis of how social welfare programs affect unemployment in 17 OECD countries, from 1975 to 2000, using a detailed concept of labor “decommodification” to make cross-national comparisons of generosity. The results show that unemployment benefits remain an important, robust determinant of unemployment even when the new measure is used.     

Sliding Scales and Wage Flexibility in 1920s Britain

This note uses a cross-section of industry-level wage and unemployment rate information for early 1920s Britain to demonstrate that, in general, sliding scales had little impact on wage settlements. The evidence overwhelmingly suggests that industries which had an above-average unemployment rate in the early 1920s experienced a disproportionate fall in nominal wages. There are also compositional effects in the sample which suggest that industries which had a predominantly male workforce, or were highly exposed to international competition in product markets, saw above-average rates of wage deflation.     

Women’s Employment and Childcare Choices in Spain Through The Great Recession

The Great Recession (2008–13) changed patterns in women’s employment and the use of formal and informal external childcare among mothers of young children in Spain. This paper analyzes these changes using an analytical strategy that takes into account interdependencies across the outcomes under study. The results show that the economic crisis has resulted in interesting changes in the use of external childcare across mothers’ and fathers’ employment status; for example, as men’s unemployment increased, the use of informal non-parental childcare declined, which might be related to (unobserved) changes in fathers’ involvement in childcare during the recession. These results further indicate the need for policies that improve access to formal childcare, as well as policies that provide men and women with employment stability.