A Reduced-form Equation for the Unemployment Rate Estimated from a Panel of Nineteen OECD Countries

Authors

  • Dimitris Hatzinikolaou University of Ioannina
  • Konstantina Girtzimani University of Ioannina
  • Christos Mousafiris University of Ioannina

Keywords:

unemployment, labour market, OECD

Abstract

Using a dynamic fixed-effects model for a panel of nineteen OECD countries and annual aggregate data, 1970-2008, we estimate a reduced-form equation for the observed unemployment rate. We find that wage-push factors, such as employment protection and union power, increase the unemployment rate, whereas net immigration reduces it, although this last effect is practically negligible. We also find that the labour market is characterised by strong “lagged adjustment processes,” so the governments of the countries in the sample have an additional incentive to fight current unemployment, to prevent it from becoming prolonged.

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Published

2015-09-29

Issue

Section

Articles