Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
What determines unemployment in the long run? Band spectrum regression on ten countries 1913-2016
Stockholm University, Faculty of Social Sciences, Department of Economic History and International Relations.ORCID iD: 0000-0002-4718-6434
(English)Manuscript (preprint) (Other academic)
Abstract [en]

The rise in unemployment since the 1980s has been predominantly understood as driven by short-term shocks and rigid labor market institutions (Blanchard and Wolfers, 2000; Layard et al., 2005), while others have pointed to 'jobless growth' and job matching (Pissarides, 2000). While most studies focus on short-run explanations, this paper presents an analysis of the long-run determinants of unemployment. To the best of our knowledge, no previous cross-country study has investigated the long-run relationship between unemployment and macroeconomic performance over a time period that stretches before the 1960s. To address this issue, we use wavelet analysis to decompose time series covering ten countries 1913-2016, into short-, medium-, and long-run variations, and band spectrum regressions on the relation between unemployment, GDP, investment, interest rate and productivity. This methodology has several advantages compared to standard econometrical methods and other tools for decomposition. Through estimations of cross-country regression models, we find strong indications that unemployment correlates negatively with the long-run components of investment. About 17 percent of overall variations and 29 percent of long-run variations in unemployment are explained by long-run variations in capital formation. In structural break models on each of the ten countries we find that capital formation explains between 43 percent and 84 percent of variations in unemployment. For most countries, long-run shifts in capital formation are associated with long-run shifts in unemployment in the opposite direction. Our analysis hence suggests the importance of understanding aggregate demand and capital formation if we wish to understand long-term labor market outcomes.

Keywords [en]
Unemployment, wavelets, capital formation
National Category
Economic History
Research subject
Economic History
Identifiers
URN: urn:nbn:se:su:diva-177230OAI: oai:DiVA.org:su-177230DiVA, id: diva2:1380466
Funder
Ragnar Söderbergs stiftelseThe Jan Wallander and Tom Hedelius Foundation, P15-0133Available from: 2019-12-18 Created: 2019-12-18 Last updated: 2020-02-24Bibliographically approved
In thesis
1. Empirical essays on unemployment and business cycles
Open this publication in new window or tab >>Empirical essays on unemployment and business cycles
2020 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This dissertation examines business cycles in Sweden, and the patterns in and driving forces of short- and long-term movements in unemployment in a selection of high-income countries throughout the 20th century. While this has been studied numerous times before, this dissertation starts from the point of view that there is no consensus in social science on how to understand these phenomena. This study consists of an introductory chapter and four related but self-contained papers. One contribution of this thesis is the use of temporal disaggregation methods to estimate more detailed time series on gross domestic product (GDP) and unemployment. New quarterly estimates of GDP are then used, with the help of the Bry-Boschan algorithm, to reconstruct the Swedish business cycle in the period 1913–2014. This identifies a number of new patterns not visible in the annual data. A second contribution is different analyses of the extent to which unemployment can be explained by macroeconomic indicators such as GDP growth, capital formation and productivity. Different methods, such as band spectrum regression and wavelet analysis, are used to capture longer-term effects. Numerous results are presented that indicate that macroeconomic performance, notably capital formation, can have medium- to long-term effects on unemployment. This is in line with theoretical models on equilibrium unemployment that take account of the possibility of persistence in the return to long-run equilibrium, or models that comprise more than one unemployment equilibria. While this is not unknown in previous research, it contradicts several highly influential versions of equilibrium unemployment models, as well as a great body of research on the subject. These contributions have several important implications for future research. Historical chronologies should take account of the possibility that data of higher or lower frequency may lead to important differences in results. Empirical and theoretical research on labor markets should continue to investigate more deeply the possibility that unanticipated short-term events can have long-term effects on labor market outcomes.

Place, publisher, year, edition, pages
Stockholm: Department of Economic History and International Relations, Stockholm university, 2020. p. 45
Keywords
business cycles, Okun’s law, unemployment, capital formation, temporal disaggregation, band spectrum regression, wavelet analysis
National Category
Economic History
Research subject
Economic History
Identifiers
urn:nbn:se:su:diva-177231 (URN)978-91-7797-821-3 (ISBN)978-91-7797-822-0 (ISBN)
Public defence
2020-02-28, Nordenskiöldsalen, Geovetenskapens hus, Svante Arrhenius väg 12, Stockholm, 13:00 (Swedish)
Opponent
Supervisors
Funder
The Jan Wallander and Tom Hedelius Foundation, P15-0133Ragnar Söderbergs stiftelse
Note

At the time of the doctoral defense, the following papers were unpublished and had a status as follows: Paper 2: Manuscript. Paper 3: Manuscript. Paper 4: Manuscript.

Available from: 2020-02-05 Created: 2019-12-18 Last updated: 2020-03-13Bibliographically approved

Open Access in DiVA

fulltext(450 kB)2 downloads
File information
File name FULLTEXT01.pdfFile size 450 kBChecksum SHA-512
441ab2123437dd3b98d0f67b5727f90de5afdc5f1a0e2842ebe87e2ac52c485770f1fc3c87cb645fd390474d6a80730e60e0ccce3207df940e7b3f040dfde5a4
Type fulltextMimetype application/pdf

Search in DiVA

By author/editor
Hegelund, ErikTaalbi, Josef
By organisation
Department of Economic History and International Relations
Economic History

Search outside of DiVA

GoogleGoogle Scholar
Total: 2 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

urn-nbn

Altmetric score

urn-nbn
Total: 32 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf