Testing for hysteresis in unemployment an unobserved components approach

We suggest a new test for hysteresis in unemployment based on an unobserved components model. Observed unemployment rates are decomposed into a natural rate component and a cyclical component. The impact of lagged cyclical shocks on the current natural component is the measure of hysteresis. To identify the two components of unemployment, we assume that the cyclical compoentn is correlated with capacity utilization. The model is applied to U.S. and German data. We find no evidence of hysteresis in U.S. data. German unemployment rates exhibit substantial hysteresis. A shock of 1.0 percent to the current cyclical component permanently increases future German natural rates by about 0.5 percent. For both countries, natural rate shocks turn out to be an important impulse mechanism to explain movements in observed unemployment rates.     

HYSTERESIS AND THE NAIRU IN THE EURO AREA

This paper analyses the Nairu in the Euro Area and the influence that hysteresis had on its development. Using the Kalman‐filter technique we find that the Nairu has varied considerably since the early 1970s. The Kalman‐filter technique is applied here using explicit exogenous variables. In order to test for hysteresis, the dependence of the Nairu on actual unemployment and long‐term unemployment is estimated and found to be significant for the Euro Area and Germany, respectively. The existence of hysteresis effects implies the possibility of a long‐run non‐superneutrality of monetary policy.     

Insider-outsider influences on industry wages

The persistence of high rates of unemployment in Europe has focused renewed attention on the wage determination process. One aspect which has received particular attention recently is the extent to which wages are determined by insiders, with outsiders having little impact on the wage bargain. If outsiders are disenfranchised in the wage determination process, they may be unable to underbid themselves into employment. The insider-outsider model, and the associated implication of hysteresis, thus provides a possible explanation for persistent involuntary un-employment. Most empirical work on the importance of the insider-outsider model and hysteresis has been done at the aggregate level, either by testing whether wage growth is related to the level or the change in unemployment, or by testing if employment or unemployment follows a random walk. This paper extends both of these lines of analysis to the industry level. Based on a specification which nests alternative models of the wage determination process, estimation results are presented for fifteen industries using annual data for fourteen industrialized countries, and for pooled time-series cross-country data. The paper also tests the hypothesis that only industry-specific variables are important to the determination of industry wages and considers whether differences in industry wage determination might help to understand cross-country differences in unemployment. The results offer considerable support to the insider view of wage determination. Industries in which wages seem to be determined by a natural rate/Phillips curve model — the primary competing model considered in the paper — appear to be the exception rather than the rule. Moreover, at the industry level hysteresis does not appear to characterise wage formation in the high-unemployment European countries to a greater extent than in North America and Japan.     

An examination of personality in occupational outcomes: antagonistic managers,careless workers and extraverted salespeople

This article investigates the role of personality in the sorting of individuals between a number of occupations, allowing for an extensive array of conditioning variables. The focus is an examination of the relationship between occupational outcomes and personality using the ‘five-factor model’. We estimate a multinomial logit model using a panel data set from the Household Income and Labour Dynamics in Australia (HILDA) survey. Human capital variables are found to exhibit strong credentialism effects and there is evidence for some small dynasty hysteresis. Personality effects are found to be significant, relatively large and persistent across all occupations. The personality effects are strong enough to rival that of various education credentials. These personality effects include but are not limited to managers being less agreeable and more antagonistic; labourers being less conscientiousness; and salespeople being more extraverted.     

Distribution shocks in a Kaleckian model with hysteresis and monetary policy

This study presents a dynamic Kaleckian model with different demand and distribution regimes, a monetary policy rule and hysteresis in the natural output level. We analyse the local stability of the steady state and the transitional dynamics in different combinations of demand and distribution regimes. Our model indicates that the initial condition in an economy matters for the steady state selection from multiple ones. Using impulse response function analysis, we show that a temporary shock to the income distribution can cause permanent effects on the dynamics of endogenous variables. Moreover, the degree of hysteresis influences the magnitude of impact on output levels. Monetary policy cannot stabilise output levels in the face of temporary shocks. Finally, we find that in a wage-led demand regime, a rise in inequality of functional income may lead to secular stagnation.     

The impact of monetary policy on unemployment hysteresis

This article investigates the hypothesis that the extent to which hysteresis occurs in the aftermath of recessions depends on monetary policy reactions. The degree of hysteresis is explained econometrically by the extent of monetary easing during a recession and by standard variables for labour market institutions in a pooled cross country analysis using quarterly data. The sample includes 40 recessions in 19 Organization for Economic Co-operation and Development (OECD) countries for which the required data is available. The time period lasts for the period from 1980 to 2007. This article builds on Ball (1999) and extends the sample of countries, the time period under investigation and the set of control variables.     

Unemployment Hysteresis in the US States and the EU: A Panel Approach

This paper applies the panel unit root test proposed by Im, Pesaran and Shin (1997) to test for unemployment hysteresis in the US states and the EU countries against the alternative of a natural rate. The results show that hysteresis for the EU and the natural rate for the US states are the most plausible hypotheses.     

Flexible Fourier unit root test of unemployment for PIIGS countries

In this empirical study, we apply the flexible Fourier unit root test proposed by Enders and Lee (2012) to re-examine the hysteresis hypothesis of unemployment for PIIGS (Portugal, Ireland, Italy, Greece, and Spain) countries over the period from 1960 to 2011. We find that the Fourier unit root test has greater power than a linear method if the true data generating process of unemployment is a stationarity, non-linear process of an unknown form with structural change. The hysteresis in unemployment is confirmed for all PIIGS countries, with the exception of Portugal and Spain, when the Fourier unit root test is conducted.     

A new test for analysing hysteresis in European unemployment

This article proposes a new unit root test to analyse unemployment hysteresis. The test is able to incorporate cross-sectional dependence, unattended nonlinearity and unknown structural breaks in the time-series data. This study used data on unemployment in five European countries. The findings indicated that conventional unit root tests failed to reject the null hypothesis of hysteresis for all countries. However, the newly proposed unit root test was able to reject the null hypothesis for the Spanish unemployment rate.     

On the simultaneity of innovations and market structure

This paper examines the determinants of innovations and market structure within a simultaneous framework. From a competitive fringe model, quasi-conditional factor demand functions are derived that explain product and process innovations in terms of factor prices and market structure variables such as relative firm size, market size, and the concentration ratio where the latter set of variables result from the same optimizing process.Empirical evidence is gained from a cross section of 2276 West German firms in the manufacturing sector. In contrast to many other empirical studies, product and process innovations are measured by two dichotomous variables. An exogeneity test for the probit model is worked out and the conditional maximum likelihood estimator that emerges from this test is applied. The results show that simultaneity does matter, even if innovations are explained by market structure variables at the firm level. Accounting for endogeneity and cross-equation restrictions changes the results substantially.     

The Effect of Hysteresis on Fluctuations in Unemployment and Inflation when Inflation Expectations are Adaptive

The recent level of unemployment may affect the natural rate of unemployment. The implications of such an hysteresis effect for macroeconomic fluctuations is analyzed using a stochastic dynamic model. The greater the importance of an hysteresis effect, the more pronounced are fluctuations in unemployment and inflation. Complete hysteresis causes the economy to be unstable.     

Multivariate models with dual cycles: implications for output gap and potential growth measurement

Structural time series models applied to the factor inputs of a production function often lead to small output gaps and to erratic measures of potential growth. We introduce a dual cycle model which is an extension to the multivariate trend plus cycle model with phase shifts à la Rünstler. The dual cycle model is a combination of two types of model: the trend plus cycle model and the cyclical trend model, where the cycle appears in the growth rate of a variable. This property enables hysteresis to be taken into account. Hysteresis is likely to show up in unemployment, but it can also affect the capital stock due to the existence of long investment cycles. In the proposed model, hysteresis may affect all the factor inputs of the production function and phase shifts are extended to the dual cycles. Genuine measures of potential growth can be computed that are hysteresis-free and less prone to volatility. A complementary measure of the output gap that takes hysteresis into account can be derived.     

A new approach to testing unemployment hysteresis

This paper proposes a novel approach to testing unemployment hysteresis. It examined the existence of hysteresis in the unemployment rates of four Nordic countries, namely Denmark, Finland, Norway and Sweden, for the period of 2000–2014. The study applied four alternative methods to analyse the data. The best estimation procedure was chosen in a simple and consistent way. As the findings indicated, the ADF test and FADF test failed to reject the null hypothesis of unemployment hysteresis in all four countries. The ADF–SB test produced mixed results: it rejected the null hypothesis of hysteresis for Denmark and Norway, but failed to reject the null hypothesis for Finland and Sweden. The FADF–SB test yielded more consistent findings: it rejected the null hypothesis for all four countries. Furthermore, findings from the F-tests clearly indicated that the FADF–SB test was the best method among the four proposed alternatives. Despite some discrepancies the findings of this study suggest that unemployment in the four Nordic countries had a mean reversion tendency.     

Hysteresis in unemployment for 17 OECD countries: Stationary test with a Fourier function

In this empirical study, we apply stationary test with a Fourier function proposed by Becker et al. (2006) to re-examine the hysteresis hypothesis in unemployment for 17 OECD countries over the 1960 to 2009 period. The hysteresis in unemployment is confirmed for most of these 17 OECD countries, with the exception of Australia, Canada, Finland, France, Sweden and the USA, when Becker et al.'s (2006) stationary test with a Fourier function is conducted.     

绿色工艺创新扩散波动对经济增长的冲击

本文构建了一个两部门DSGE模型,同时考虑了创新扩散的一般规律(“S型扩散”)与企业绿色技术创新扩散的独特作用(节能作用和减排作用)。基于人口老龄化的预测,模拟随着企业绿色技术创新扩散的波动,经济系统所做出的响应。结果表明：经济变量对于企业绿色技术创新扩散的波动呈现出不同的响应路径,其中资本存量的响应具有滞后性；资本报酬率为首的相关经济变量对于正向冲击的响应出现了“翘尾效应”。最后,本文给出了稳定、正向引导市场预期和在资本市场采取预调机制的政策建议。     

Unemployment hysteresis - macro evidence from 16 OECD countries

This paper investigates empirically the presence ofunemployment hysteresis in 16 OECD countries, applying aggregate quarterly unemployment rates covering the past 25 years. Alternative test procedures are discussed and employed, posing both stationarity and hysteresis as null hypotheses. The results suggest that hysteresis effects are highly significant in Australia and Canada, and to a lesser extent also significant in most European countries and in Japan. Only in the USA, the presence of unemployment hysteresis is strongly and consistently rejected.Without attributing to them opinions or errors in the paper, I wish to thank Steinar Strøm, Ragnar Nymoen, Arvid Raknerud, Anders Rygh Swensen, Jeremy Smith and two referees for helpful comments.     

Modelling economic hysteresis losses caused by sunk adjustment costs

Transition from one economic equilibrium to another as a consequence of shocks is often associated with sunk adjustment costs. Firm-specific sunk market entry investments (or sunk market exit costs) in case of a reaction to price shocks are an example. These adjustment costs lead to a dynamic supply pattern similar to hysteresis. In analogy to “hysteresis losses” in ferromagnetism, the authors explicitly model dynamic adjustment losses in the course of market entry and exit cycles. They start from the micro level of a single firm and use explicit aggregation tools from hysteresis theory in mathematics and physics to calculate dynamic losses. The authors show that strong market fluctuations generate disproportionately large hysteresis losses for producers. This could give a reason for the implementation of stabilizing measures and policies to prevent strong (price) variations or, alternatively, to reduce the sunk entry and exit costs.     

The presence of unemployment hysteresis in the OECD: what can we learn from out-of-sample forecasts?

This paper investigates the relevance of unemployment hysteresis in seventeen OECD countries. We employ an out-of-sample forecast exercise in which a mean-reverting autoregressive model is compared to an autoregressive model with an imposed unit root. A substantial difference in forecasting performance between the two models is established for many countries, but the results are mixed in their strength. The evidence for unemployment hysteresis in Austria, Finland, Iceland, Israel, Italy, Japan and Sweden is, however, convincing. For no country can unambiguous support for a mean reverting unemployment rate be found.     

基于尖点突变理论的知识型员工组织承诺建立—破坏的动力学分析

利用尖点突变理论来解释知识型员工组织承诺演化的动力学机制及其特征,把组织承诺作为状态变量,把能有效预测组织承诺的工作满意度和组织支持作为控制变量,针对武汉IT企业调研数据,利用cuspfit软件定量地拟合出了尖点突变模型。通过分析发现,工作满意度作为正则因子、组织支持作为分歧因子,共同影响组织承诺的突变机制:①组织承诺由建立到破坏的突变是源于工作满意度和组织支持变量穿过分歧集合时产生的自组织相变;②承诺一旦被破坏就很难重新建立起来,是源于这种突变机制的滞后效应;③当工作满意度和组织支持取值在分歧集合内部时,组织承诺演化均衡态的选择(建立或者破坏)取决于员工承诺的初始水平。     

Regional Exports and Economic Growth: The Case of Spanish Regions

Different variables have been considered growth enhancing. Traditionally, physical capital, human capital, and public capital have been considered. While the first two variables have been considered positive factors, the latter shows an ambiguous effect. The literature has also considered the role of exports in the economic growth process, introducing several arguments that test the hypothesis that exports are growth enhancing. One argument to be considered is that higher exports can increase total factor productivity due to returns to scale and that exports are an effective means to introduce advanced technology. To test this argument, an empirical analysis considered three possibilities, an export model, a demand model, and a mixed model that combined both. This empirical analysis was carried out for the various Spanish regions.