Hysteresis in unemployment

O'Shaughnessy, Terry

doi:10.1093/oxrep/grr018

Cited by 26 publications

(9 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…It is important to take account of unemployment when considering labour productivity, because high unemployment and underemployment have high economic and social costs—through so-called hysteresis effects—to drain vitality from economic recovery (Blanchard and Summers 1986 ; Cross 1993 , 2000 ; O’Shaughnessy 2011 ). Short-term job losses can become long-term unemployment as unemployment-generating structural changes in labour markets—and therefore in the economy as a whole—become path-dependent (Ball 2009 ; Røed 1997 ).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Should countries that have high(er) productivity at the expense of high(er) unemployment be applauded compared to those that appear productive ‘laggards’ but manage to achieve, as the UK did prior to the Covid-19 pandemic, a situation as close to full employment as anything seen since the end of the post-WWII boom? It is important to take account of unemployment when considering labour productivity, because high unemployment and underemployment can have high economic and social costs, if unaddressed because of potential hysteresis effects (Blanchard and Summers 1986 ; Cross 1993 , 2000 ; O’Shaughnessy 2011 ). Therefore, by allowing for different levels of unemployment when measuring countries’ productivity levels, the SLPI may provide a better yardstick of their economic and social fitness.…”

Section: Social Labour Productivity Indexmentioning

confidence: 99%

See 1 more Smart Citation

Allowing for unemployment in productivity measurement

Gandy

Mulhearn

2020

SN Bus Econ

View full text Add to dashboard Cite

The labour productivity index is a mainstay measure for comparing countries’ relative economic performance, but the Covid-19 pandemic could expose some of its inherent limitations: it focuses on people in work and ignores unemployment, and it is not standardised. In theory, a country’s index value could increase, even though its GDP might fall, because of significant increased unemployment in low-productivity sectors such as tourism and retail. It follows that the index value could fall when these sectors recover. Also, high-performing countries could see their index value fall because of the pandemic’s impact in high-value sectors, such as demand for oil.Consequently, a wider perspective of productivity is necessary. This paper, therefore, proposes a complementary index which adjusts labour productivity for levels of unemployment—the social labour productivity index (SLPI)—and recommends that the labour productivity index itself should be standardised. The relationship between employment and productivity is complex. For example, the UK’s economic performance, involving comparatively low labour productivity and low unemployment, has been deemed a ‘productivity puzzle’. A literature review discusses this relationship, but it is clear that econometric worldwide evaluation requires very large data sets, that are unlikely to be routinely available in practice to monitor international performance. By contrast, data sets on national productivity are small and already available, although they contain little or no data on causal factors. SLPI values were calculated for differing levels of unemployment and relative labour productivity for newly employed workers for countries where data was available; with patterns over the period 1986–2016 established for the G7 countries, Portugal, Ireland, Greece, and Spain. There were marked variations between the two indices for countries with high unemployment. The SLPI presents a practicable measure which can be utilised quickly in these unprecedented times. Using available data to compare countries’ GDP with their total workforce, it arguably provides a better measure of their overall economic and social health. Sensitivity analyses varying assumptions can model differing potential scenarios to sit alongside GDP and labour productivity index predictions.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Section: Social Labour Productivity Indexmentioning

confidence: 99%

Allowing for unemployment in productivity measurement

Gandy

Mulhearn

2020

SN Bus Econ

View full text Add to dashboard Cite

show abstract

“…Economic theory does not provide a single opinion on the evolution of the unemployment rate time series. Two influential theories of unemployment are: the natural rate of the unemployment theory (Friedman, 1968;Phelps, 1986) and the theory of unemployment hysteresis (Blanchard & Summers, 1987). Alternative unemployment theories suggest different characteristics of the unemployment rate time series.…”

Section: Literature Reviewmentioning

confidence: 99%

Unemployment rate dynamics in small open economy: The case of Serbia

Anić¹,

Mladenovic²

2020

Industrija

View full text Add to dashboard Cite

Dynamic relationship among unemployment rate and key macroeconomic variables is explored for the Serbian economy that has been characterized by high unemployment rates since the outcome of the Great Recession. This analysis reveals how effective policy measures can be in reducing unemployment rate. Cointegrated vector autoregressive model is employed for the period 2014-2019. Prior to multivariate dynamic modelling, the validity of hysteresis hypothesis for unemployment rate is assessed. Obtained results show significant negative long-run effect of real wages on unemployment rate, and positive long-run effect of real effective exchange rate appreciation on real wages. For further reduction of unemployment rate demand-side measures should be employed.

show abstract

“…topic may have peaked in the late 1980s/early 90s (Røed 1997), the more recent worldwide economic crisis spurred renewed focus on the topic (see e.g. Ball 2009, Andersen 2010, Amable and Mayhew 2011, O'Shaughnessy 2011, Delong and Summers 2012. At that time some of these economists stressed that our understanding of the mechanisms giving rise to persistence was still limited despite the amount of research conducted in the preceding two decades.…”

Section: Introductionmentioning

confidence: 99%

Decoding unemployment persistence: an econometric framework for identifying and comparing the sources of persistence with an application to UK macrodata

Møller

2017

Empir Econ

View full text Add to dashboard Cite

 Users may download and print one copy of any publication from the public portal for the purpose of private study or research.  You may not further distribute the material or use it for any profit-making activity or commercial gain  You may freely distribute the URL identifying the publication in the public portal If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately and investigate your claim.

show abstract

Hysteresis in unemployment

Cited by 26 publications

References 33 publications

Allowing for unemployment in productivity measurement

Allowing for unemployment in productivity measurement

Unemployment rate dynamics in small open economy: The case of Serbia

Decoding unemployment persistence: an econometric framework for identifying and comparing the sources of persistence with an application to UK macrodata

Contact Info

Product

Resources

About