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.
AbstractIn this paper, we quantify the degree of persistence in the unemployment rates of transition countries using a variety of methods benchmarked against the EU. Initially, we work with the concept of linear 'Hysteresis' as described by the presence of unit roots in unemployment as in most empirical research on this area. Given that this is potentially a narrow definition, we also take into account the existence of structural breaks and nonlinear dynamics in unemployment. Finally, we examine whether CEECs' unemployment presents features of multiple equilibria, that is, if it remains locked into a new level whenever some structural change or sufficiently large shock occurs. Our findings show that, in general, we can reject the unit‐root hypothesis after controlling for structural changes and business‐cycle effects, but we can observe the presence of a high and low unemployment equilibria. The speed of adjustment is faster for CEECs than the EU, although CEECs tend to move more frequently between equilibria.
AbstractIn this paper we analyse the effect of remittances on employment performance for Central and East European (CEE) economies. We show that the impact of remittances on unemployment depends on its effect on productivity growth and investment. In order to empirically analyse the impact of remittances we estimate a productivity equation using a set of 11 transition countries during the 1990 to 1999 period. Our results show support for the view that remittances have a positive impact on productivity and employment both directly and indirectly through its effect on investment.
ABSTRACTWe examine the long‐run real wages–unemployment relationship for five OECD countries over the period 1960:1–2001:4. Given the theoretical possibility of non‐linear equilibrium due to downward real wage rigidity we employ econometric tests that allow for the presence of non‐linearities in the long‐run equilibrium. We adopt the notion of 'hidden co‐integration' suggested by Granger and Yoon. This methodology has several advantages with respect to other non‐linear models. We find statistical evidence that, in general, there is a long‐run positive relation between real wages and unemployment only when both are affected by positive shocks. We also find a negative relationship between unemployment and productivity. The empirical analysis is complemented with the estimation of error correction models for all countries.
PurposeThe paper aims to re‐examine the stationarity properties of unemployment rates in 12 European Union (EU) countries over the period 1988: I‐1999: IV.Design/methodology/approachThis paper applies a battery of second‐generation panel unit root tests that allow for cross‐sectional correlation.FindingsThe study shows that, contrary to previous empirical literature, hysteresis does not characterise EU unemployment.Originality/valueThis paper uses recent advances in the econometrics of panel unit root tests. The new tests have more power than the traditional ones in detecting the null hypothesis of a unit root.
Work ethics affect labour supply. This idea is modelled assuming that work is habit forming. We introduce working habits in a neoclassical growth model and compare its outcomes with a model without habit formation. In addition, we analyse the impact of different forms of technical progress. The findings are that (i) labour supply in the habit formation case is higher than in the neoclassical case; (ii) unlike in the neoclassical case, labour supply in the presence of habit formation depends on the kind of technical progress; and (iii) the kind of technical progress will hence affect the steady‐state levels of consumption, capital stock and output.
In an attempt to measure the impact of cultural heritage on growth, this paper matches the definition of culture as a stock with the cultural heritage list provided by UNESCO, as it is a variable that changes at a very low pace. We test the hypothesis on whether the existence of a strong cultural heritage, that is, where culture has had a large impact on people's life, leads to higher growth. We find evidence that the impact of cultural heritage on growth is positive and it is smaller for countries that either suffer a high degree of political instability or enjoy a high degree of rule of law.
Climate change is one of the most serious risks facing humanity. Temperature rises can lead to catastrophic climate and natural events that threaten livelihoods. From rising sea levels to flooding, bush fires, extreme temperatures and droughts, the economic and human cost is too large to ignore. More than 190 world leaders got together in Glasgow during November 2021 at the UN's COP26 climate change summit to discuss progress on the Paris Agreement (COP21) and to agree on new measures to limit global warming. In Paris, countries agreed to limit global warming to well below 2° and aim for 1.5° as well as to adapt to the impacts of a changing climate and raise the necessary funding to deliver on these aims. However, actions to date were not nearly enough as highlighted by the IPCC (2018) special report. The world is still on track to reach warming above 3° by 2100. As evident from figure 1, global temperatures have been on a steadily increasing path since the start of the 20th century and this process has substantially accelerated since the beginning of the 1980s. This has been unevenly distributed, with temperatures in the Northern hemisphere being a full 1°C higher than for the 1961–1990 average, whilst temperatures in the Southern hemisphere have increased by almost 0.5°C.
