What determines unemployment in the long run? Band spectrum regression on ten countries 1913-2016
(2023) In Structural Change and Economic Dynamics 64. p.144-167- Abstract
- The rise in unemployment since the 1980s has been predominantly
understood as driven by short-term shocks, or long-run conditions in the
form of rigid labor market institutions or 'jobless growth', mostly based
on studies on the period from 1960 onward. Aggregate demand is usu-
ally assumed to have no long-run impact on unemployment, but recent
contributions call this into question. This paper adopts a long-run view
of macroeconomic history to explore the long-run relationship between
unemployment and macroeconomic variables. We use wavelet analysis to
decompose time series covering ten countries 1913-2016, into short-run,
medium-run, and long-run variations, and band spectrum regressions on
the... (More) - The rise in unemployment since the 1980s has been predominantly
understood as driven by short-term shocks, or long-run conditions in the
form of rigid labor market institutions or 'jobless growth', mostly based
on studies on the period from 1960 onward. Aggregate demand is usu-
ally assumed to have no long-run impact on unemployment, but recent
contributions call this into question. This paper adopts a long-run view
of macroeconomic history to explore the long-run relationship between
unemployment and macroeconomic variables. We use wavelet analysis to
decompose time series covering ten countries 1913-2016, into short-run,
medium-run, and long-run variations, and band spectrum regressions on
the relation between unemployment, GDP, investment, interest rates and
productivity. Through estimations of cross-country regression models, we
find strong indications that unemployment correlates negatively with the
long-run components of investment. Taking potential structural breaks
into consideration in each of the ten countries and ignoring other vari-
ables, our results indicate that short- to long-run components of capi-
tal formation explain between 40 percent and 81 percent of variations
in unemployment. Our results support the view that economic models
of long-run unemployment and labor market policy should take long-run
conditions for investment into account. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/7e449190-f0f1-4f00-8049-912ae6982f40
- author
- Hegelund, Erik LU and Taalbi, Josef LU
- organization
- publishing date
- 2023
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Structural Change and Economic Dynamics
- volume
- 64
- pages
- 24 pages
- publisher
- Elsevier
- external identifiers
-
- scopus:85144397016
- ISSN
- 0954-349X
- DOI
- 10.1016/j.strueco.2022.11.009
- language
- English
- LU publication?
- yes
- id
- 7e449190-f0f1-4f00-8049-912ae6982f40
- date added to LUP
- 2022-11-30 12:34:02
- date last changed
- 2023-02-01 15:09:24
@article{7e449190-f0f1-4f00-8049-912ae6982f40,
abstract = {{The rise in unemployment since the 1980s has been predominantly<br/>understood as driven by short-term shocks, or long-run conditions in the<br/>form of rigid labor market institutions or 'jobless growth', mostly based<br/>on studies on the period from 1960 onward. Aggregate demand is usu-<br/>ally assumed to have no long-run impact on unemployment, but recent<br/>contributions call this into question. This paper adopts a long-run view<br/>of macroeconomic history to explore the long-run relationship between<br/>unemployment and macroeconomic variables. We use wavelet analysis to<br/>decompose time series covering ten countries 1913-2016, into short-run,<br/>medium-run, and long-run variations, and band spectrum regressions on<br/>the relation between unemployment, GDP, investment, interest rates and<br/>productivity. Through estimations of cross-country regression models, we<br/>find strong indications that unemployment correlates negatively with the<br/>long-run components of investment. Taking potential structural breaks<br/>into consideration in each of the ten countries and ignoring other vari-<br/>ables, our results indicate that short- to long-run components of capi-<br/>tal formation explain between 40 percent and 81 percent of variations<br/>in unemployment. Our results support the view that economic models<br/>of long-run unemployment and labor market policy should take long-run<br/>conditions for investment into account.}},
author = {{Hegelund, Erik and Taalbi, Josef}},
issn = {{0954-349X}},
language = {{eng}},
pages = {{144--167}},
publisher = {{Elsevier}},
series = {{Structural Change and Economic Dynamics}},
title = {{What determines unemployment in the long run? Band spectrum regression on ten countries 1913-2016}},
url = {{http://dx.doi.org/10.1016/j.strueco.2022.11.009}},
doi = {{10.1016/j.strueco.2022.11.009}},
volume = {{64}},
year = {{2023}},
}