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Title:Hysteresis and Persistence in the Course of Unemployment: The EU and US Experience PDF Logo
Authors:Dreger, Christian
Reimers, Hans-Eggert
Issue Date:2006
Series/Report no.:DIW-Diskussionspapiere 572
Abstract:We investigate hysteresis and persistence behaviour in the course of unemployment in EU countries and US states by means of first and second generation panel unit root tests. While the former tests assume independent cross sections, the latter control for dependencies. The first generation tests indicate, that unemployment is persistent, but nevertheless stationary. Second generation tests reveal mixed results, but the evidence for stationarity is much stronger for the US. Hysteresis in EU unemployment is attributed to the idiosyncratic, but not to the common component. In contrast, idiosyncratic components are stationary in the US. If hysteresis behaviour is also relevant here, it is more likely to arise in the common component. These findings might reflect a lower degree of migration of the unemployed in the EU from starving into prosperous regions, possibly because of language barriers or national labour market regulations.
Subjects:Unemployment persistence
hysteresis
panel unit roots
JEL:C22
E24
C23
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des DIW
DIW-Diskussionspapiere

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