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Competitio

Vol. 7 No. 2 (2008)
Papers

The Rigidity of Labor Markets and the Unit Root in the Time Series of Unemployment rate: Raising a Problem

Published:
2008-12-15
DOI Linkhttps://doi.org/10.21845/comp/2008/2/6
Authors
Janos Kormos,
Pal Czegledi
Keywords
unemployment unit root nearly unit root process
How To Cite
Selected Style: APA
Kormos, J., & Czegledi, P. (2008). The Rigidity of Labor Markets and the Unit Root in the Time Series of Unemployment rate: Raising a Problem. Competitio, 7(2), 103-114. https://doi.org/10.21845/comp/2008/2/6
Abstract

The article is a review of the literature concerning the time series of the unemployment rate, and of the economic explanations behind the tests of these time series. We seek to identify the theoretical explanations behind a possible unit root in unemployment time series. We argue that the main difficulty faced by these unit root tests is the change in labor market institutions. The ffects of institutional changes make the traditional tests rather weak, while the panel unit root tests oversimplify the economics of the question. Our conclusion is that the possible application of the tests developed theoretically for nearly unit root processes seems to offer a way out of this dilemma.

Journal of Economic Literature (JEL) classifications: C22, E24

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