What goes up sometimes stays up : shocks and institutions as determinants of unemployment persistence

Gianni Amisano; Massimiliano Serati

We analyse the determinants of unemployment persistence in four OECDcountries byestimating a structural Bayesian VAR with an informative priorbased on an insiders/outsiders model. We explicitly insert unemployment ben-efits and labour taxes so that our identification is not affected by the Faust andLeeper (1997) critique. We find widespread hysteresis: demand shocks play adominant role in explaining unemployment also in the medium-run. Moreoverreal wages have low sensitivity to cyclical fluctuations and to labour marketdisequilibria. Our results emphasise the real power of the unions and their in-teractions with structural shocks and other institutions as crucial determinantsof hysteresis.

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Year of publication:	2002
Authors:	Amisano, Gianni ; Serati, Massimiliano
Publisher:	Rotterdam [u.a.] : Tinbergen Inst.
Subject:	unemployment persistence \| insiders-outsiders \| hysteresis \| structural VAR analysis \| Bayesian inference \| Arbeitslosigkeit \| Unemployment \| Hysterese \| Hysteresis \| VAR-Modell \| VAR model \| Schock \| Shock \| Natürliche Arbeitslosenquote \| Natural rate of unemployment \| Schätzung \| Estimation \| Großbritannien \| United Kingdom \| Schweden \| Sweden \| Theorie \| Theory \| Italien \| Italy