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    Global shocks and unemployment adjustment

    Smith, Ron P. and Zoega, Gylfi (2004) Global shocks and unemployment adjustment. Working Paper. Birkbeck, University of London, London, UK.

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    Abstract

    The literature on unemployment dynamics is mainly concerned with the nature and impact of shocks to unemployment. In this paper we use OECD unemployment data to infer the nature of these shocks using factor analysis. We find that two Principal Components can account for a large part of the variance of unemployment between and within countries. We then use regression analysis in which equilibrium unemployment depends on a global shock and domestic labour market institutions, and the institutions also determine the response to global shocks and the speed of convergence to equilibrium. We find that national unemployment series do converge to a moving equilibrium and that the responsiveness shocks and the speed of convergence to equilibrium also change over time as domestic labour market institutions change. The calculation of the Principal Components is suggestive of the possible economic causes of long swings in unemployment.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 0401
    Keyword(s) / Subject(s): Unemployment dynamics, Principal Components, labour-market institutions
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Innovation Management Research, Birkbeck Centre for
    Depositing User: Administrator
    Date Deposited: 09 Apr 2019 12:08
    Last Modified: 16 Oct 2019 17:34
    URI: http://eprints.bbk.ac.uk/id/eprint/27103

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