Unemployment invariance hypothesis and labor supply: a test for 31 American countries

Ángel Maridueña-Larrea and Ángel Martín-Román ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the empirical validity of the Unemployment Invariance Hypothesis (UIH) using a sample of 31 American countries and annual data from 1991 to 2023. While previous literature often focused on single-country analyses, an existing study for Latin America covers only six countries and relies on short time spans, limiting their ability to capture full economic cycles. This paper expands both the temporal and geographical scope, enabling more accurate cross-country comparisons. The results generally reject the UIH, with significant implications for economic policy in both cases—whether the hypothesis is accepted or not. In countries where UIH is rejected, the discouraged worker effect (DWE) tends to outweigh the added worker effect (AWE). These findings highlight the need for country-specific labor policies, which can be better designed based on the estimates presented.

Keywords: Cointegration; Added worker effect; Discouraged worker effect; Unemployment invariance; Unemployment rate; Labor force participation rate. (search for similar items in EconPapers)
JEL-codes: C10 E24 J64 J68 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/125831/1/MPRA_paper_125831.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:125831

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().