Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2006:15: Does Unemployment Hysteresis Equal Employment Hysteresis?

Magnus Gustavsson () and Pär Österholm ()
Additional contact information
Magnus Gustavsson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Pär Österholm: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: This paper investigates if conclusions regarding labour market hysteresis differ depending on whether employment or unemployment rates are studied. Applying a range of unit-root tests to monthly data from Australia, Austria, Canada, Finland, Sweden, the U.K. and the U.S., we find results for employment rates that contrast those based on unemployment rates. In particular, rather than the mixed evidence for hysteresis found using unemployment rates, employment rates result in unequivocal evidence of hysteresis in Australia, Canada and the U.S.. These findings cast doubt on previous conclusions in the literature.

Keywords: Labour market; Persistence; Unit root test

JEL-codes: C22; E24; J21

27 pages, July 10, 2006

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