Hysteresis and Labour Market Institutions: Evidence from the UK and the Netherlands

31 Pages Posted: 18 Dec 2015  

Antonio Rodriguez Gil

University of Leeds - Leeds University Business School (LUBS)

Date Written: December 17, 2015

Abstract

This paper uses data for the UK and the Netherlands (1983q4-2011q4) to test if hysteresis occurs in these economics, and through what mechanisms. The novelty of the paper resides in the use of a VAR-IRF that encompasses previous hysteresis studies and the use of specific Labour Market Institutions shocks. This allows us to disentangle what specific demand and supply-variables affect unemployment in the long-run. Further we also investigate the impact of different supply and demand-shock on long-term unemployment. Our findings suggest that there is hysteresis in both countries, and that it happens through different channels, namely, long-term unemployment, productivity, capital stock and real long-term interest rates. These results have implications for structural and macroeconomic policies that we also discuss.

Keywords: Hysteresis, NAIRU, Labour Market Institutions, Impulse-Response analysis

JEL Classification: C32, E24, J64

Suggested Citation

Rodriguez Gil, Antonio, Hysteresis and Labour Market Institutions: Evidence from the UK and the Netherlands (December 17, 2015). Leeds University Business School Working Paper No. 16-02. Available at SSRN: https://ssrn.com/abstract=2704802 or http://dx.doi.org/10.2139/ssrn.2704802

Antonio Rodriguez Gil (Contact Author)

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

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