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Unemployment in the OECD: Models and Mysteries

Author

Listed:
  • Junankar, Pramod N. (Raja)

    (University of New South Wales)

  • Madsen, Jakob B.

    (University of Copenhagen)

Abstract

This paper compares models used to explain OECD unemployment. The models suggest that the "natural rate of unemployment" has been driven up mainly by wage push factors. Panel data on twenty-two OECD countries are used to investigate the explanatory power of these models over the past two decades. Our estimates reveal that coefficients on key variables often turn out with signs which are at odds with the theories or are insignificant and that a second order autoregressive model performs nearly as well as all the other models. The conclusion offers some directions for future research.

Suggested Citation

  • Junankar, Pramod N. (Raja) & Madsen, Jakob B., 2004. "Unemployment in the OECD: Models and Mysteries," IZA Discussion Papers 1168, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1168
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cruz, Manuel David, 2023. "Labor Productivity, Real Wages, and Employment in OECD Economies," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 367-382.
    2. Junankar, Pramod N. (Raja), 2011. "The Global Economic Crisis: Long-Term Unemployment in the OECD," IZA Discussion Papers 6057, Institute of Labor Economics (IZA).
    3. Elgin, Ceyhun & Kuzubas, Tolga Umut, 2013. "Wage-productivity gap in OECD economies," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 7, pages 1-21.
    4. Antonia López‐Villavicencio & José Ignacio Silva, 2011. "Employment Protection And The Non‐Linear Relationship Between The Wage‐Productivity Gap And Unemployment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(2), pages 200-220, May.
    5. Mihai Mutascu & Scott W. Hegerty, 2023. "Predicting the contribution of artificial intelligence to unemployment rates: an artificial neural network approach," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(2), pages 400-416, June.
    6. Michèle Belot & Jan C. van Ours, 2004. "Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labor market reforms?," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 621-642, October.
    7. Laurence Ball, 1999. "Aggregate demand and Long-Run Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 189-252.
    8. Nir Klein, 2012. "Real Wage, Labor Productivity, and Employment Trends in South Africa: A Closer Look," IMF Working Papers 2012/092, International Monetary Fund.
    9. Cowgill, Matt, 2013. "A Shrinking Slice of the Pie: The Labour Income Share in Australia," MPRA Paper 46209, University Library of Munich, Germany.
    10. Manuel David Cruz, 2022. "Labor productivity, real wages, and employment: evidence from a panel of OECD economies over 1960-2019," Working Papers PKWP2203, Post Keynesian Economics Society (PKES).

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    More about this item

    Keywords

    supply shocks; natural rate; unemployment; hysteresis;
    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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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