Hysteresis in Unemployment: Evidence from Latin America
Peer Reviewed
Date issued
March 2008
Subject
Financial Crisis and Structural Adjustement;
Workforce and Employment
JEL code
C22 - Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes;
C23 - Panel Data Models • Spatio-temporal Models;
E24 - Employment • Unemployment • Wages • Intergenerational Income Distribution • Aggregate Human Capital • Aggregate Labor Productivity;
J24 - Human Capital • Skills • Occupational Choice • Labor Productivity;
J60 - Mobility, Unemployment, Vacancies, and Immigrant Workers: General
Country
Argentina;
Brazil;
Chile;
Colombia;
Costa Rica;
Ecuador;
Mexico;
Nicaragua;
Panama;
Paraguay;
Peru;
Uruguay;
Venezuela
Category
Working Papers
This paper tests the hysteresis hypothesis in unemployment for 13 Latin American countries covering the period 1980-2005. The tests exploit the time series and the cross sectional variation of the series, and allows for cross section dependence and a different number of endogenously determined structural breakpoints. The findings give support to the hysteric dynamic hypothesis for the majority of the countries analyzed. The implications of the results have ramifications regarding macro-stabilization, structural reform, and the design of social safety protection.
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