The cause of Danish unemployment: Demand or supply shocks?

Anders Warne and Henrik Hansen

Empirical Economics, 2001, vol. 26, issue 3, 486 pages

Abstract: We study the Danish unemployment experience 1905-92 using a common trends model with cointegration constraints. To justify the identifying assumptions about the cointegration vectors and the common trends we present a simple macroeconomic model of the labor market. The model determines the long run behavior of labor productivity, employment, unemployment, real product and real consumer wages. The empirical results give support for three cointegration relations and two common trends. Based on the economic model the trends are interpreted as representing labor productivity (technology) and labor supply. With unemployment being nonstationary, the common trends analysis indicates that labor supply shocks is the primary source for explaining the behavior of unemployment.

Keywords: Cointegration; ·; Common; Trends; ·; Unemployment (search for similar items in EconPapers)
JEL-codes: C32 E24 (search for similar items in EconPapers)
Date: 2001-08-20
Note: Received: August 1999/Final Version Received: June 2000
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Citations: View citations in EconPapers (15)

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