What goes up sometimes stays up: Shocks and Institutions as Determinants of Unemployment Persistence

Gianni Amisano and Massimiliano Serati ()

No 02-116/4, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We analyse the determinants of unemployment persistence in four OECD countries byestimating a structural Bayesian VAR with an informative prior based on an insiders/outsiders model. We explicitly insert unemployment ben- efits and labour taxes so that our identification is not affected by the Faust and Leeper (1997) critique. We find widespread hysteresis: demand shocks play a dominant role in explaining unemployment also in the medium-run. Moreover real wages have low sensitivity to cyclical fluctuations and to labour market disequilibria. Our results emphasise the real power of the unions and their in- teractions with structural shocks and other institutions as crucial determinants of hysteresis.

Keywords: unemployment persistence; insiders-outsiders; hysteresis; structural VAR analysis; Bayesian inference. (search for similar items in EconPapers)
JEL-codes: E24 J64 (search for similar items in EconPapers)
Date: 2002-11-18
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Related works:
Working Paper: What goes up sometimes stays up: shocks and institutions as determinants of unemployment persistence (2002)
Journal Article: What goes up sometimes stays up: shocks and institutions as determinants of unemployment persistence (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:dgr:uvatin:20020116

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