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Structural rate of unemployment, hysteresis, human capital, and macroeconomic data

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  • Jean-Marie Le Page

    (Université Paris-Panthéon-Assas)

Abstract

The relationship between the unemployment rate and the evolution of human capital is different depending on whether one subscribes to a neoclassical logic or to a hysteresis theory. This paper proposes that when the unemployment rate reaches a high level for some time, the persistence phenomenon, or hysteresis, weakens the attractive forces of the natural rate of unemployment. The unemployment rate can then reach a different equilibrium value. However, according to Blanchard and Summers, this equilibrium is unstable and fragile. In the second part of this paper, we propose an indicator to measure the intensity of the attraction forces of the natural rate of unemployment. The empirical values of this index show the weak attraction forces of the natural rate of unemployment in economies with high levels of long-term unemployment.

Suggested Citation

  • Jean-Marie Le Page, 2022. "Structural rate of unemployment, hysteresis, human capital, and macroeconomic data," Post-Print hal-04016193, HAL.
    • Handle: RePEc:hal:journl:hal-04016193
    DOI: 10.3934/NAR.2022008
    Note: View the original document on HAL open archive server: https://hal.science/hal-04016193
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    References listed on IDEAS

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    1. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    2. Jean-Marie Le Page, 2014. "Growth-Employment Relationship and Leijonhufvud's Corridor," Recherches économiques de Louvain, De Boeck Université, vol. 80(2), pages 111-124.
    3. Blanchard, Olivier Jean & Summers, Lawrence H, 1988. "Beyond the Natural Rate Hypothesis," American Economic Review, American Economic Association, vol. 78(2), pages 182-187, May.
    4. Ioannis Kospentaris, 2021. "Unobserved Heterogeneity and Skill Loss in a Structural Model of Duration Dependence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 280-303, January.
    5. Laurence M. Ball, 2009. "Hysteresis in Unemployment: Old and New Evidence," NBER Working Papers 14818, National Bureau of Economic Research, Inc.
    6. Mark W. Watson, 2014. "Inflation Persistence, the NAIRU, and the Great Recession," American Economic Review, American Economic Association, vol. 104(5), pages 31-36, May.
    7. Christopher A. Pissarides, 1992. "Loss of Skill During Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1371-1391.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    natural rate of unemployment hysteresis fragile equilibrium employment dynamics attraction forces of the natural rate of unemployment JEL Codes: E24; E32; J24; natural rate of unemployment; hysteresis; fragile equilibrium; employment dynamics; attraction forces of the natural rate of unemployment JEL Codes: E24;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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