Scandinavian Working Papers in Economics
Memorandum,
Oslo University, Department of Economics
No 20/2012: Panel Data Evidence on the Role of Institutions and Shocks for Unemployment Dynamics and Equilibrium
Ragnar Nymoen () and Victoria Sparrman ()
Additional contact information
Ragnar Nymoen: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Victoria Sparrman: Statistics Norway, Postal: P.O Box 8131 Dep, N-0033 Oslo, Norway
Abstract: We estimate the quantitative importance of labour market institutions for equilibrium unemployment in OECD. The empirical equation for unemployment is based on the solution of a dynamic macroeconomic model where wages and prices are jointly determined with unemployment. Compared to existing studies, the theoretical model implies a higher order dynamics in the nal equation for unemployment and the sample has more variation in unemployment and in institutions. Finally, we incorporate objectively and automatically selected indicators for structural breaks. We find that institutional variables have statistical signi cance, but that these variables account for relatively little of the overall change in the OECD average unemployment rate. The shocks to the economy have been more important for the evolution in the actual average unemployment rate.
Keywords: OECD area unemployment; dynamics; structural breaks; equilibrium unemployment; wage setting; NAIRU; labour market institutions; automatic variable selection
JEL-codes: C22; C23; C26; C51; E02; E11; E24
37 pages, September 18, 2012
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memo-20-2012.pdf
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