Testing of Hysteresis in Unemployment

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Authors

NĚMEC Daniel MORAVANSKÝ Dalibor

Year of publication 2006
Type Article in Proceedings
Conference Proceedings of the 24th International Conference Mathematical Methods in Economics 2006.
MU Faculty or unit

Faculty of Economics and Administration

Citation
Field Economy
Keywords hysteresis; unemployment; Phillips curve; wage bargaining model
Description Traditional approaches for testing and describing of hysteresis hypothesis are based on unit root tests and on various specifications of the Phillips curve. From this point of view, suggestions about roots of hysteresis phenomenon are related mainly to the process of a wage setting within the frame of the Insider-Outsider model. In this contribution, a little more general wage bargaining model is presented. From the theoretical point of view, we are able to decide whether hysteresis effect is the rule rather than the exception. Using macroeconomic data of the Czech Republic, parameters of this model are estimated and compared with empirical results within the framework of traditional approaches. Conclusions about the patterns of Czech unemployment are made.
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