Unemployment in the OECD since the 1960s. Do we really know?

Tino Berger and Gerdie Everaert

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: Nickell, Nunziata and Ochel [Economic Journal, 2005] argue that unemployment rates cointegrate with labour market institutions in a panel of OECD countries. This paper reproduces their Maddala-Wu panel cointegration test and shows that this test is only valid when (i) the number of countries tends to infinity and (ii) the underlying country-specific cointegration tests are independent. Their finding of cointegration does not survive when small sample properties and heterogeneous cross-sectional dependencies are taken into account. This suggests that the estimated impact of institutions on unemployment is spurious.

Keywords: unemployment; panel cointegration; bootstrapping (search for similar items in EconPapers)
JEL-codes: C15 C33 E24 (search for similar items in EconPapers)
Pages: 6 pages
Date: 2006-11
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:06/425

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