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Title:Characteristics of unemployment dynamics: The chain reaction approach PDF Logo
Authors:Karanassou, Marika
Snower, Dennis J.
Issue Date:2007
Series/Report no.:Reihe Ökonomie, Institut für Höhere Studien und Wissenschaftliche Forschung (IHS) 206
Abstract:The aim of this paper is to analyze and estimate salient characteristics of unemployment dynamics. Movements in unemployment are viewed as "chain reactions" of responses to labour market shocks, working their way through systems of interacting lagged adjustment processes. In the context of estimated labour market systems for Germany, the UK, and the US, we construct aggregate measures of unemployment responses to temporary and permanent shocks. These measures are temporal and quantitative. Furthermore, we estimate the contributions of individual lagged adjustments to these aggregate measures. Our empirical results indicate that lagged adjustment processes play an important part in explaining how temporary and permanent shocks affect unemployment, that temporary and permanent shocks can yield quite different inter-country comparisons of unemployment effects, and that the quantitative and temporal measures can also yield markedly different inter-country comparisons.
Subjects:Unemployment; Natural rate hypothesis; Labour markets; Employment; Adjustment costs
JEL:E30
J64
J60
E37
J32
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS)

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