Unemployment persistence in Europe: evidence from the 27 EU countries

Abstract

This paper investigates unemployment persistence in the 27 EU member states by applying fractional integration methods to quarterly data (both seasonally adjusted and unadjusted) from 2000q1 to 2020q4. The obtained evidence points to high levels of persistence in all cases. With seasonally adjusted data, a small degree of mean reversion is found in the case of Belgium, Luxembourg and Malta, but this evidence disappears under the assumption of weakly correlated disturbances. More cases of mean reversion are found instead when analysing the unadjusted series. In particular, countries such as Belgium, France, Croatia, Italy, Luxembourg and Malta display orders of integration significantly lower than 1. In addition, significant negative time trends are found in the case of Bulgaria, Croatia, Malta and Romania, and a positive one for Luxembourg. Finally, the Covid-19 pandemic had mixed effects, with (seasonal) persistence increasing in some countries whilst decreasing in others and not changing in a minority of cases. On the whole, our results support the hysteresis hypothesis for the European economies.

Testing hysteresis for the US and UK involuntary part-time employment

“…So far, an extensive list of empirical papers have addressed this specific question following different standard macro-econometric approaches: from univariate linear unit root tests in the 90s (Brunello (1990); Mitchell (1993); Neudorfer et al (1990); Røed (1996)), to panel integration methods (Bolat et al (2014); Camarero et al (2006); Camarero and Tamarit (2004); León-Ledesma (2002); Smyth (2003); Song and Wu (1998)), and finally non-linear/structural break extensions to classical unit root testing (Camarero et al (2005); Chang (2011); Furuoka (2014); Lee et al (2010Lee et al ( , 2009). We can also mention fractional integration methods for analysing unemployment Gil-Alana (2007, 2008); Caporale et al (2022); Cuestas and Gil-Alana (2011)). These empirical methods to test persistence have also been extended and applied to other labour market topics as self-employment (Congregado et al (2012); Gil-Alana and Payne (2015); Lopez-Perez et al ( 2020)).…”

The COVID-19 pandemic in the disaster and economic discourses

“…In such an instance, cyclical fluctuations of GDP could have a negative and permanent effect on the growth of potential GDP. In a similar manner, in their study, Caporale et al (2022) assess the degree of unemployment persistence in the 27 European Union (EU) member states and try to address the question of whether the COVID-19 pandemic had affected it. The results of their analysis, which used fractional integration methods on figures from the first quarter of 2000 to the fourth quarter of 2020, overall, point to high levels of persistence in the unemployment rates of all the 27 EU economies following the initial COVID-19 shock, hence supporting the hysteresis hypothesis.…”

Danimarka ve İsveç İçin İşsizlik Histerisi Hipotezinin Test Edilmesi

“…The study of Blanchard and Summers (1986) is at the forefront of the empirical studies on unemployment hysteresis. Apart from this study, other examined empirical studies are as follows: Brunello (1990), Neudorfer et al (1990), Jaeger and Parkinson (1994), Røed (1996), Song and Wu (1997), Arestis and Mariscal (1999), Papell et al (2000), León-Ledesma (2002), Camarero and Tamarit (2004), Camarero et al (2006), Gustavsson and Österholm (2006), Camarero et al (2008), Gomes and Da Silva (2008), Lee and Chang (2008), Lee et al (2009), Lee (2010), Chang (2011), Ayala et al (2012), Cevik and Dibooglu (2013), Lee et al (2013), Bakas and Papapetrou (2014), Cheng et al (2014), Furuoka (2014), Tiwari (2014), Jiang and Chang (2016), Akdoğan (2017), Güriş et al (2017), Meng et al (2017), Bahmani-Oskooee et al (2018), Rodriguez-Gil (2018), Yaya et al (2019), Khraief et al (2020), Omay et al (2020), Yilanci et al (2020), Omay et al (2021), Bostancı and Koç (2022), Caporale et al (2022),…”