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Does Labor Market Hysteresis Hold in Low Income Countries?

Author

Listed:
  • Ifedolapo Olabisi Olanipekun

    (Department of Economics, Eastern Mediterranean University, North Cyprus)

  • Seyi Saint Akadiri

    (Department of Economics, Eastern Mediterranean University, North Cyprus)

  • Osundina Olawumi

    (Department of Economics, Eastern Mediterranean University, North Cyprus,)

  • Festus Victor Bekun

    (Department of Economics, Eastern Mediterranean University, North Cyprus)

Abstract

This study tests for labor market hysteresis in low income countries while accounting for structural break in the unemployment rates. This is to verify if unemployment in low income countries will return back to natural rate of unemployment in the long run using data from Nigeria and South Africa. It follows the procedure for single structural break unit root test by Zivot and Andrews (1992). The empirical result indicates that accounting for structural break makes the unemployment rate series stationary for Nigeria; hence, shocks to the unemployment rates will have temporary effects. Contrarily, evidence of hysteresis was found in South Africa's unemployment rates series because it was not stationary. Nigeria's macroeconomic policy can aim at lowering inflation through a contractionary policy, it will temporarily increase unemployment but it will return back to its natural state, but structural reforms that will prompt shock on South African unemployment will increase the persistence of hysteresis.

Suggested Citation

  • Ifedolapo Olabisi Olanipekun & Seyi Saint Akadiri & Osundina Olawumi & Festus Victor Bekun, 2017. "Does Labor Market Hysteresis Hold in Low Income Countries?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 19-23.
    • Handle: RePEc:eco:journ1:2017-01-04
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    References listed on IDEAS

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    2. Asiya Maskaeva & Mgeni Msafiri, 2021. "Youth unemployment hysteresis in South Africa: Macro-micro analysis," WIDER Working Paper Series wp-2021-20, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    Unemployment; Hysteresis; Unit Root; Stationarity;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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