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Common Trends Analysis of Danish Unemployment

Author

Listed:
  • Henrik Hansen

    (Institute of Economics, University of Copenhagen)

  • Anders Warne

    (Stockholm University)

Abstract

We study the Danish unemployment experience 1905-92 using a multivariate common trends model with cointegration constraints. To interpret the empirical results we analyse a simple macroeconomic model of the labor market. The empirical results indicate that there are three cointegration relations and two common trends among the five variables we examine, and the economic model suggests that the trends are due to technology and labor supply. Moreover, Danish unemployment appears to be nonstationary. Based on the identifying assumption of constant returns to scale in production, from the empirical common trends analysis we find that shocks to labor supply is the source behind hysteresis in unemployment.

Suggested Citation

  • Henrik Hansen & Anders Warne, 1995. "Common Trends Analysis of Danish Unemployment," Discussion Papers 95-03, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:9503
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    Citations

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    Cited by:

    1. Katarina Juselius, 1999. "Models and relations in economics and econometrics," Journal of Economic Methodology, Taylor & Francis Journals, vol. 6(2), pages 259-290.
    2. Laura Gérard-Prenveille, 2003. "Déterminants du taux de chômage d’équilibre et ajustements sur le marché du travail : une analyse sur données françaises," Économie et Prévision, Programme National Persée, vol. 159(3), pages 17-37.
    3. Jacobson, Tor & Vredin, Anders & Warne, Anders, 1997. "Common trends and hysteresis in Scandinavian unemployment," European Economic Review, Elsevier, vol. 41(9), pages 1781-1816, December.

    More about this item

    Keywords

    cointegration; identification; structural parameters; supply and demand shocks;
    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

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