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Unemployment Dynamics Across OECD Countries

R. Balakrishnan and Claudio Michelacci ()

Working Papers from Centro de Estudios Monetarios Y Financieros-

Abstract: The European Community and the US have experienced vastly different unemployment dynamics over the last two decades. This paper investigates whether these differences are due to exposure to different shocks or reacting differently to the same shocks. With the premise of a search theoretic framework and a structural VAR methodology, the paper robustly identifies aggregate versus reallocative shocks. With the exception of Spain where most of the dynamics seems to be driven by reallocation, it is found that most differences in unemployment dynamics arise because of differences in responses to shocks. In particular the US Labour market is quicker to adjust than the European Community. This implies that EEC economies might be dynamically 'sclerotic', even if the size of the steady state labour market flows give the impression that European Labour markets are quite active. Various identifying assumptions, additional labour supply shocks and different variables are used so that the results seem to be robust.

Keywords: UNEMPLOYMENT; LABOUR MARKET; ECONOMETRIC MODELS (search for similar items in EconPapers)
JEL-codes: C11 J6 (search for similar items in EconPapers)
Pages: 50 pages
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:fth:cemfdt:9806

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