On the alternative explanations of persistence of unemployment in the OECD countries

This paper begins with a summary statement of a few relevant facts about the worsening state of unemployment since the mid-1970s in the OECD countries. A joint statistical test of the hypotheses of the natural rate, hysteresis, and the persistence is conducted by pooling annual data (1963-93) from up to 16 OECD countries. The results provide strong evidence in support of the persistence hypothesis and the non-linearity of the Phillips curve while concurrently rejecting the other two alternative explanations.